The core-periphery model by Krugman (1991) has two 'dramatic' implications: catastrophic agglomeration and locational hysteresis. We study this seminal model with CES instead of Cobb-Douglas upper tier preferences. This small generalization suffices to change these stark implications. For a wide range of parameters we find that the model exhibits instead a smooth and easily reversible transition from symmetry to agglomeration.
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Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number
3258.
Find related papers by JEL classification: F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies F15 - International Economics - - Trade - - - Economic Integration F22 - International Economics - - International Factor Movements and International Business - - - International Migration R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography) R50 - Urban, Rural, and Regional Economics - - Regional Government Analysis - - - General
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Ottaviano, Gianmarco & Thisse, Jacques-Francois, 2004.
"Agglomeration and economic geography,"
Handbook of Regional and Urban Economics,
in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 58, pages 2563-2608
Elsevier.
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