We study the effects of a decrease in trade costs on the spatial distribution of industry in a multi-regional economy, when a rise in the regional population of workers generates higher urban costs. When the number of cities is unaffected by falling trade costs, small cities become smaller for large trade costs, medium-sized cities become smaller for medium values of trade costs, and large cities become smaller for small trade costs. Furthermore, when urban costs are ‘identical,’ we show that there exists a path of stable equilibria such that the industry, first, experiences progressive agglomeration into a decreasing number of cities and, then, dispersion into a growing number of cities. The second phase arises because of the increasing urban costs associated with the process of agglomeration.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
3386.
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
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Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002.
"Agglomeration and Trade Revisited,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
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OTTAVIANO, Gianmarco & TABUCHI, Takatoshi & THISSE, Jacques-Franois, 1999.
"Agglomeration and trade revisited,"
CORE Discussion Papers
1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
[Downloadable!]
Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999.
"Agglomeration and Trade Revisited,"
CIRJE F-Series
CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
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Cited by: (explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)
PICARD, Pierre & TABUCHI, Takatoshi, 2003.
"Natural agglomeration,"
CORE Discussion Papers
2003101, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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