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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
    File Function: Fisrt version / Primera version, 2003
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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
    Date of revision:
    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. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    2. 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.
    3. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
    4. 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.
    5. 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.
    6. Sonnenschein, Hugo, 1982. "Price Dynamics Based on the Adjustment of Firms," American Economic Review, American Economic Association, vol. 72(5), pages 1088-96, December.
    7. 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.
    8. 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.
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    Citations

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    Cited by:
    1. MOSSAY, Pascal & PICARD, Pierre M., . "On spatial equilibria in a social interaction model," CORE Discussion Papers RP -2436, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    2. PICARD, Pierre M. & TABUCHI, Takatoshi, . "Self-organized agglomerations and transport costs," CORE Discussion Papers RP -2182, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    3. Mossay, Pascal, 2013. "A theory of rational spatial agglomerations," Regional Science and Urban Economics, Elsevier, vol. 43(2), pages 385-394.
    4. 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.
    5. BOUCEKKINE, Raouf & CAMACHO, Carmen & ZOU, Benteng, 2006. "Bridging the gap between growth theory and the new economic geography: the spatial Ramsey model," CORE Discussion Papers 2006072, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    6. 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).
    7. P M Picard & T Tabuchi, 2003. "Natural Agglomeration," The School of Economics Discussion Paper Series 0329, Economics, The University of Manchester.
    8. Mossay, Pascal, 2006. "Stability of spatial adjustments across local exchange economies," Regional Science and Urban Economics, Elsevier, vol. 36(4), pages 431-449, July.
    9. Picard, Pierre M. & Tabuchi, Takatoshi, 2013. "On microfoundations of the city," Journal of Economic Theory, Elsevier, vol. 148(6), pages 2561-2582.
    10. 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.
    11. Pascal Mossay, 2004. "Spatial Stability," Working Papers. Serie AD 2004-47, Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie).

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