Agglomeration and Endogenous Capital
AbstractThe new' economic geography focuses on the footloose-labor and the vertically-linked-industries models. Both are complex since they feature demand-linked and cost-linked agglomeration forces. I present a simpler model where agglomeration stems from demand-linked forces arising from endogenous capital with forward-looking agents. The model's simplicity permits many analytic results (rare in economic geography). Trade-cost levels that trigger catastrophic agglomeration are identified analytically, liberalization between almost equal-sized nations is shown to entail near-catastrophic' agglomeration, and Krugman's informal stability test is shown to be equivalent to formal tests in a fully specified dynamic model.
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Bibliographic InfoPaper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 6459.
Date of creation: Mar 1998
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Publication status: published as European Economic Review, Vol.43, no.2 (1999): 253-280.
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Other versions of this item:
- F13 - International Economics - - Trade - - - Trade Policy; International Trade Organizations
- F20 - International Economics - - International Factor Movements and International Business - - - General
- F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
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