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Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations

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Listed:
  • Anastasios Xepapadeas

    (Athens University of Economics and Business)

  • Efthymia Kyriakopoulou

    (Athens University of Economics and Business)

Abstract

We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of emissions - and an immobile production factor act as centrifugal forces, while positive knowledge spillovers and iceberg transportation costs act as centripetal forces. We study the agglomeration effects caused by trade-offs between centripetal and centrifugal forces. The above effects govern firms’ location decisions and as a result, they define the distribution of economic activity across space. We derive the rational expectations equilibrium and the social optimum, compare the outcomes and characterize the optimal spatial policies.

Suggested Citation

  • Anastasios Xepapadeas & Efthymia Kyriakopoulou, 2009. "Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations," Working Papers 2009.70, Fondazione Eni Enrico Mattei.
    • Handle: RePEc:fem:femwpa:2009.70
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    Cited by:

    1. Dean M. Hanink, 2010. "Perspectives on Regional Change: A Review Essay on Handbook of Regional Growth and Development Theories," Growth and Change, Wiley Blackwell, vol. 41(1), pages 3-27, March.
    2. Costantini, Valeria & Mazzanti, Massimiliano & Montini, Anna, 2013. "Environmental performance, innovation and spillovers. Evidence from a regional NAMEA," Ecological Economics, Elsevier, vol. 89(C), pages 101-114.

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    More about this item

    Keywords

    Agglomeration; Spatial Economics; Environmental Policy; Knowledge Spillovers; Transportation Cost;
    All these keywords.

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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