Self-Defeating Regional Concentration
AbstractWe present a two-region economy model, in which inefficienct concentration may occur. Individuals in this economy, even though they prefer evenly distributed across the two regions, concentrate into one region in their pursuit of better life. We characterize the conditions for such self-defeating concentration. What is crucial is the coordination failure between the entry decision of service firms and the migration decision of individuals, generated by the incompleteness of markets, or the lack of opportunity to signal demand and supply for potential services. The argument does not rely on price distortions, congestion externalities, or myopia in migration decisions.
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Bibliographic InfoPaper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1086.
Date of creation: May 1993
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Postal: Center for Mathematical Studies in Economics and Management Science, Northwestern University, 580 Jacobs Center, 2001 Sheridan Road, Evanston, IL 60208-2014
Web page: http://www.kellogg.northwestern.edu/research/math/
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Other versions of this item:
- Kiminori Matsuyama & Takaaki Takahashi, 1993. "Self-Defeating Regional Concentration," NBER Working Papers 4484, National Bureau of Economic Research, Inc.
- Kiminori Matsuyama & Takaaki Takahashi, 1993. "Self-Defeating Regional Concentration," Discussion Papers 1050, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
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