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Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls

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Author Info
Charlot, Sylvie
Gaigné, Carl
Robert-Nicoud, Frédéric
Thisse, Jacques-François

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Abstract

The objective of this Paper is to apply different welfare approaches to the canonical model developed by Krugman, with the aim of comparing the only two possible market outcomes, i.e. agglomeration and dispersion. More precisely, we use the potential Pareto improvement criteria, as well as the utilitarian and Rawlsian welfare functions. No clear answer emerges for the following two reasons: (i) in general, there is indetermination when compensation schemes are used and (ii) the best outcome heavily depends on societal values regarding inequalities across individuals. However, simulations undertaken for plausible values of the main parameters suggest that there might be excessive agglomeration.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4715.

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Date of creation: Oct 2004
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Handle: RePEc:cpr:ceprdp:4715

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Related research
Keywords: agglomeration; compensation mechanism; economic geography; welfare;

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Find related papers by JEL classification:
F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
R13 - Urban, Rural, and Regional Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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References listed on IDEAS
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  1. 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. [Downloadable!] (restricted)
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  2. Head, Charles Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  4. Ottaviano, Gianmarco I. P. & Thisse, Jacques-Francois, 2002. "Integration, agglomeration and the political economics of factor mobility," Journal of Public Economics, Elsevier, vol. 83(3), pages 429-456, March. [Downloadable!] (restricted)
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  5. Ginsburgh, Victor & Papageorgiou, Yorgo & Thisse, Jacques-Francois, 1985. "On existence and stability of spatial equilibria and steady-states," Regional Science and Urban Economics, Elsevier, vol. 15(2), pages 149-158, June. [Downloadable!] (restricted)
  6. Wildasin, David E., 1986. "Spatial variation of the marginal utility of income and unequal treatment of equals," Journal of Urban Economics, Elsevier, vol. 19(1), pages 125-129, January. [Downloadable!] (restricted)
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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.)

  1. Miren Lafourcade & Jacques-François Thisse, 2008. "New economic geography: A guide to transport analysis," PSE Working Papers 2008-02, PSE (Ecole normale supérieure). [Downloadable!]
  2. Kenmei Tsubota, 2009. "Agglomeration and wage bargaining," KIER Working Papers 675, Kyoto University, Institute of Economic Research. [Downloadable!]
  3. Eric Toulemonde, 2008. "Multinationals: Too Many or Too Few?— The Proximity–concentration Trade-off," Open Economies Review, Springer, vol. 19(2), pages 203-219, April. [Downloadable!] (restricted)
  4. Jens Südekum, 2009. "Regional costs-of-living with congestion and amenity differences: an economic geography perspective," The Annals of Regional Science, Springer, vol. 43(1), pages 49-69, March. [Downloadable!] (restricted)
  5. Candau, Fabien, 2006. "Good Governance, Trade and Agglomeration," MPRA Paper 2353, University Library of Munich, Germany. [Downloadable!]
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  6. OTTAVIANO, Gianmarco & THISSE, Jacques-Franois, 2003. "Agglomeration and economic geography," CORE Discussion Papers 2003016, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE). [Downloadable!]
    Other versions:
  7. Egle Tafenau, 2008. "Can Welfare Be Improved By Relocating Firms? The Case Of The Constructed Capital Model," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 64, Faculty of Economics and Business Administration, University of Tartu (Estonia). [Downloadable!]
  8. Candau, Fabien, 2006. "The Spatial and Public Economics of Regions, a Theoretical and Empirical Survey," MPRA Paper 1153, University Library of Munich, Germany. [Downloadable!]
  9. Jan Kranich, 2008. "R&D and the agglomeration of industries," Working Paper Series in Economics 83, University of Lüneburg, Institute of Economics. [Downloadable!]
  10. Frédéric Robert-Nicoud, 2006. "Agglomeration and Trade with Input--Output Linkages and Capital Mobility," Spatial Economic Analysis, Taylor and Francis Journals, vol. 1(1), pages 101-126, June. [Downloadable!] (restricted)
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