A Chamberlinian Agglomeration Model with External Economies of Scale
AbstractWe 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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Bibliographic InfoPaper provided by Graduate School of Economics and Business Administration, Hokkaido University in its series Discussion paper series. A with number 242.
Length: 25 pages
Date of creation: Aug 2011
Date of revision:
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New economic geography; Agglomeration; Footloose capital; External economies of scale; F12; F15; F21; R12;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F15 - International Economics - - Trade - - - Economic Integration
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- 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-2011-09-22 (All new papers)
- NEP-GEO-2011-09-22 (Economic Geography)
- NEP-URE-2011-09-22 (Urban & Real Estate Economics)
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