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The Structure of Simple 'New Economic Geography' Models

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  • Robert-Nicoud, Frédéric

Abstract

This paper shows that the mathematical structure of the most widely used New Economic Geography models is the same, irrespective of the underlying agglomeration mechanism assumed (factor migration, input-output linkages, endogenous capital accumulation). This enables us to provide analytical proofs to three important and related results in the field. First, standard models display at most two interior steady states beyond the symmetric one; we refer to the latter steady state as 'dispersion' because the manufacturing industry is evenly spread across locations. Second, when interior, asymmetric steady-states exist they are unstable. The final result of this paper relates to the corner steady states of the model whereby the manufacturing sector is clustered in a single location; we refer to such a steady states as 'agglomeration'. I establish that both agglomeration and dispersion are stable steady state for some economically meaningful parameter values of the model. This paper also stresses the empirical implications of the most important results derived in this study.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4326.

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Date of creation: Mar 2004
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Handle: RePEc:cpr:ceprdp:4326

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Related research

Keywords: hysteresis; natural state space; new economic geography; number of steady-states; stability;

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Cited by:
  1. Murata, Yasusada & Thisse, Jacques-Francois, 2005. "A simple model of economic geography a la Helpman-Tabuchi," Journal of Urban Economics, Elsevier, vol. 58(1), pages 137-155, July.
  2. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2005. "Putting new economic geography to the test: free-ness of trade and agglomeration in the EU regions," CCSO Working Papers 200502, University of Groningen, CCSO Centre for Economic Research.
  3. Pablo Sanguinetti & Iulia Siedschlag & Christian Volpe Martincus, 2009. "The Impact of South-South Preferential Trade Agreements on Industrial Development: An Empirical Test," IDB Publications 9307, Inter-American Development Bank.
  4. Sidorov, Alexander, 2011. "The Impact of Exogenous Asymmetry on Trade and Agglomeration in Core-Periphery Model," MPRA Paper 29627, University Library of Munich, Germany.
  5. Sanguinetti, Pablo & Traistaru, Iulia & Volpe Martincus, Christian, 2004. "Economic integration and location of manufacturing activities: Evidence from MERCOSUR," ZEI Working Papers B 11-2004, ZEI - Center for European Integration Studies, University of Bonn.
  6. Fr�d�ric Robert-Nicoud, 2006. "Agglomeration and Trade with Input–Output Linkages and Capital Mobility," Spatial Economic Analysis, Taylor & Francis Journals, vol. 1(1), pages 101-126.
  7. Barbero, Javier & Zofío, José Luis, 2012. "The multiregional core-periphery model: The role of the spatial topology," Working Papers in Economic Theory 2012/12, Universidad Autónoma de Madrid (Spain), Department of Economic Analysis (Economic Theory and Economic History).
  8. Maarten Bosker & Steven Brakman & Harry Garretsen & Marc Schramm, 2007. "Adding Geography to the New Economic Geography," CESifo Working Paper Series 2038, CESifo Group Munich.
  9. Alexander V. Sidorov, 2011. "International Trade and Agglomeration in Asymmetric World: Core-Periphery Approach," DEGIT Conference Papers c016_020, DEGIT, Dynamics, Economic Growth, and International Trade.

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