Determining the Level of Transportation Costs in the Core-Periphery Model: a Majority Voting Approach
AbstractWe analyse the political determination of transportation costs in an analytically solvable core-periphery model. In a benchmark case with certainty about where agglomeration takes place, we find that a majority of voters prefers low trade costs and the resulting equilibrium is an industrialised core and a de-industrialised periphery. Allowing for uncertainty we show that a high trade cost candidate, that guarantees the initial symmetric equilibrium, may defeat the core-periphery equilibrium candidate. The reason is that a coalition of risk-averse immobile factors of production votes for status quo due to uncertainty about which region that will attract industrial activity.
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Bibliographic InfoPaper provided by Lund University, Department of Economics in its series Working Papers with number 2005:32.
Length: 37 pages
Date of creation: 31 May 2005
Date of revision:
Note: This paper has been replaced by WP 2006:22 "Resisting Economic Integration when Industry Location is Uncertain"
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core-periphery model; majority voting; new economic geography; regional policy;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- F15 - International Economics - - Trade - - - Economic Integration
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-06-05 (All new papers)
- NEP-CDM-2005-06-05 (Collective Decision-Making)
- NEP-GEO-2005-06-05 (Economic Geography)
- NEP-INT-2005-06-05 (International Trade)
- NEP-POL-2005-06-05 (Positive Political Economics)
- NEP-URE-2005-06-05 (Urban & Real Estate Economics)
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