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Increasing Returns And Heterogeneity In A Spatial Economy

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  • Pascal Mossay

    (Universidad de Alicante)

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    Abstract

    We study a general equilibrium model of global trade and local migration in a continuous geographical space. Trade is based on the Dixit-Stiglitz model of monopolistic competition. Migration is modelled as a local interaction decision process. Incentives for migration are of two types: homogeneous incentives of the group, associated with the identity of taste for higher utility levels, and heterogeneous incentives, due to idiosyncrasies in location taste. The impact of migration on the regional structure is twofold. First, when driven by utility differentials, it contributes to agglomeration because of the presence of increasing returns. Second, when reflecting heterogeneous individual choices, it fosters regional convergence. Furthermore, the size of agglomerations, when they occur, increases with the taste for variety and the proportion of the manufacturing population, and decreases with transport costs.

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-04.pdf
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    Bibliographic Info

    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2003-04.

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    Length: 31 pages
    Date of creation: Feb 2003
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    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasad:2003-04

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    Related research

    Keywords: Heterogeneity; agglomeration; dispersion; monopolistic competition;

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    References

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    1. Krugman, Paul & Venables, Anthony J., 1995. "The Seamless World: A Spatial Model of International Specialization," CEPR Discussion Papers 1230, C.E.P.R. Discussion Papers.
    2. Papageorgiou, Yorgo Y & Smith, Terrence R, 1983. "Agglomeration as Local Instability of Spatially Uniform Steady-States," Econometrica, Econometric Society, vol. 51(4), pages 1109-19, July.
    3. Greenberg, Joseph, 1983. "Local public goods with mobility: Existence and optimality of a general equilibrium," Journal of Economic Theory, Elsevier, vol. 30(1), pages 17-33, June.
    4. Mansoorian, Arman & Myers, Gordon M., 1997. "On the consequences of government objectives for economies with mobile populations," Journal of Public Economics, Elsevier, vol. 63(2), pages 265-281, January.
    5. Sonnenschein, Hugo, 1981. "Price dynamics and the disappearance of short-run profits : An example," Journal of Mathematical Economics, Elsevier, vol. 8(2), pages 201-204, July.
    6. W. A. V. Clark, 1985. "Human Migration," Book Chapters, in: Grant I. Thrall (ed.), Scientific Geography, pages 51 Regional Research Institute, West Virginia University.
    7. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    8. repec:brs:ecchap:12 is not listed on IDEAS
    9. Sonnenschein, Hugo, 1982. "Price Dynamics Based on the Adjustment of Firms," American Economic Review, American Economic Association, vol. 72(5), pages 1088-96, December.
    10. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
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    Citations

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    Cited by:
    1. PICARD, Pierre & TABUCHI, Takatoshi, 2003. "Natural agglomeration," CORE Discussion Papers 2003101, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. Pascal Mossay & Pierre M. Picard, 2009. "On Spatial Equilibria in a Social Interaction Model," CREA Discussion Paper Series 09-02, Center for Research in Economic Analysis, University of Luxembourg.
    3. 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.
    4. Pierre Picard & Takatoshi Tabuchi, 2010. "Self-organized agglomerations and transport costs," Economic Theory, Springer, vol. 42(3), pages 565-589, March.
    5. Carmen, CAMACHO & Benteng, ZOU, 2003. "The Spatial Solow Model," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 2003017, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Raouf Boucekkine & C. Camacho & B. Zou, 2007. "Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model," Working Papers 2007_27, Business School - Economics, University of Glasgow.
    7. Pascal Mossay, 2004. "Spatial Stability," Working Papers. Serie AD 2004-47, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).
    8. Akamatsu, Takashi & Takayama, Yuki & Ikeda, Kiyohiro, 2009. "Spatial Discounting, Fourier, and Racetrack Economy: A Recipe for the Analysis of Spatial Agglomeration Models," MPRA Paper 21738, University Library of Munich, Germany, revised 25 Dec 2009.
    9. Mossay, Pascal, 2006. "Stability of spatial adjustments across local exchange economies," Regional Science and Urban Economics, Elsevier, vol. 36(4), pages 431-449, July.
    10. Mossay, Pascal, 2013. "A theory of rational spatial agglomerations," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 385-394.
    11. Picard, Pierre M. & Tabuchi, Takatoshi, 2013. "On microfoundations of the city," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2561-2582.

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