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A model of economic geography with demand pull and congestion costs

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Author Info
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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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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Related research
Keywords: Congestion costs demand pull urban concentration transport costs.

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Find related papers by JEL classification:
R12 - Urban, Rural, and Regional 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
F15 - International Economics - - Trade - - - Economic Integration
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses

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  1. 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. [Downloadable!]
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