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A model of economic geography with demand pull and congestion costs

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  • Olga Alonso-Villar

    (Universidade de Vigo)

Abstract

This paper proposes a simple model of economic geography in which to derive analytical results when jointly considering two centrifugal forces —congestion costs together with the pull demand effect— within the Dixit-Stiglitz-Iceberg framework. In this vein, we develop a unified model with labor mobility that combines some of the features of Tabuchi (1998) with those of Forslid and Ottaviano (2003). We analytically show that when considering the effects of congestion costs, dispersion of economic activity is possible not only at high but also at low transport costs. This result corroborates previous numerical simulations conducted by Tabuchi (1998).

Suggested Citation

  • Olga Alonso-Villar, 2006. "A model of economic geography with demand pull and congestion costs," Working Papers 56, ECINEQ, Society for the Study of Economic Inequality.
    • Handle: RePEc:inq:inqwps:ecineq2006-56
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2006-56.pdf
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    2. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Economics of Governance, Springer, vol. 83(1), pages 197-228, October.
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    6. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-François Thisse, 2021. "Agglomeration And Trade Revisited," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 3, pages 59-85, World Scientific Publishing Co. Pte. Ltd..
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    11. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 2002. "Taste heterogeneity, labor mobility and economic geography," Journal of Development Economics, Elsevier, vol. 69(1), pages 155-177, October.
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    18. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
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    Cited by:

    1. Akamatsu, Takashi & Takayama, Yuki, 2009. "A Simplified Approach to Analyzing Multi-regional Core-Periphery Models," MPRA Paper 21739, University Library of Munich, Germany, revised 29 Oct 2009.
    2. Fabien Candau, 2011. "Is Agglomeration Desirable?," Annals of Economics and Statistics, GENES, issue 101-102, pages 203-227.
    3. Corey Lang, 2010. "Heterogeneous transport costs and spatial sorting in a model of New Economic Geography," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 191-202, March.
    4. Rizov, Marian & Oskam, Arie & Walsh, Paul, 2012. "Is there a limit to agglomeration? Evidence from productivity of Dutch firms," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 595-606.
    5. Fabien Candau & Michaël Goujon & Jean-François Hoarau & Serge Rey, 2014. "Real exchange rate and competitiveness of an EU's ultra-peripheral region: La Reunion Island," International Economics, CEPII research center, issue 137, pages 1-21.
    6. Schaeffer, Y. & Charlot, S., 2012. "Inequality aversion, income redistribution and economic geography," Working Papers 201204, Grenoble Applied Economics Laboratory (GAEL).
    7. Fabien Candau, 2011. "Is Agglomeration Desirable?," Annals of Economics and Statistics, GENES, issue 101-102, pages 203-227.
    8. Olga Alonso-Villar, 2006. "A Reflection On The Effects Of Transport Costs Within The New Economic Geography," Working Papers 57, ECINEQ, Society for the Study of Economic Inequality.
    9. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.

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    More about this item

    Keywords

    Congestion costs; demand pull; urban concentration; transport costs.;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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