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A Chamberlinian Agglomeration Model with External Economies of Scale

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  • Kurata, Hiroshi
  • Nomura, Ryoichi
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    Abstract

    We investigate the effects of a reduction in trade costs on industrial location and welfare in an economy with external economies of scale. We propose a Chamberlinian agglomeration model with footloose capital, which is analytically-solvable. With respect to industrial location, we demonstrate that a reduction in trade cost is likely to lead to agglomeration. With respect to welfare, we show that agglomeration makes a country with agglomeration better off, and the country without agglomeration better or worse off, depending on the degree of external economies of scale. We also prove that agglomeration makes the overall economy better off.

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    File URL: http://hdl.handle.net/2115/46972
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    File URL: http://eprints.lib.hokudai.ac.jp/dspace/bitstream/2115/46972/1/DPA242.pdf
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    Bibliographic Info

    Paper provided by Graduate School of Economics and Business Administration, Hokkaido University in its series Discussion paper series. A with number 242.

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    Length: 25 pages
    Date of creation: Aug 2011
    Date of revision:
    Handle: RePEc:hok:dpaper:242

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    Related research

    Keywords: New economic geography; Agglomeration; Footloose capital; External economies of scale; F12; F15; F21; R12;

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    1. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
    2. CHARLOT, Sylvie & GAIGNÉ, Carl & ROBERT-NICOUD, Frédéric & THISSE, Jacques, 2003. "Agglomeration and welfare : the core-periphery model in the light of Bentham, Kaldor, and Rawls," CORE Discussion Papers 2003039, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Kristian Behrens & Carl Gaigne & Gianmarco I.P. Ottaviano & Jacques-François Thisse, 2007. "Countries, regions and trade: on the welfare impacts of economic integration," Working Papers 10661, Institut National de la Recherche Agronomique, France.
    4. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
    5. Amiti, Mary, 2001. "Location of Vertically Linked Industries: Agglomeration versus Comparative Advantage," CEPR Discussion Papers 2800, C.E.P.R. Discussion Papers.
    6. Pfluger, Michael, 2004. "A simple, analytically solvable, Chamberlinian agglomeration model," Regional Science and Urban Economics, Elsevier, vol. 34(5), pages 565-573, September.
    7. Michael Pflüger & Jens Südekum, 2004. "Integration, Agglomeration and Welfare," Working Papers of the Research Group Heterogenous Labor 04-24, Research Group Heterogeneous Labor, University of Konstanz/ZEW Mannheim.
    8. Suga, Nobuhito, 2007. "A monopolistic-competition model of international trade with external economies of scale," The North American Journal of Economics and Finance, Elsevier, vol. 18(1), pages 77-91, February.
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