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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).

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File URL: http://www.ecineq.org/milano/WP/ECINEQ2006-56.pdf
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Paper provided by ECINEQ, Society for the Study of Economic Inequality in its series Working Papers with number 56.

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Length: 25 pages
Date of creation: 2006
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Handle: RePEc:inq:inqwps:ecineq2006-56

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Keywords: Congestion costs; demand pull; urban concentration; transport costs.;

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  1. Forslid, Rikard & Haaland, Jan I. & Midelfart Knarvik, Karen Helene, 2002. "A U-shaped Europe?: A simulation study of industrial location," Journal of International Economics, Elsevier, vol. 57(2), pages 273-297, August.
  2. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Papers in Regional Science, Springer, vol. 83(1), pages 197-228, October.
  3. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
  4. 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.
  5. Venables, Anthony J., 1993. "Equilibrium Locations of Vertically Linked Industries," CEPR Discussion Papers 802, C.E.P.R. Discussion Papers.
  6. PICARD, Pierre & ZENG, Dao-Zhi, 2003. "Agricultural sector and industrial agglomeration," CORE Discussion Papers 2003022, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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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. Marian Rizov, 2011. "Is there a limit to agglomeration? Evidence from productivity of Dutch firms," ERSA conference papers ersa11p231, European Regional Science Association.

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