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Self-Defeating Regional Concentration

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  • Kiminori Matsuyama
  • Takaaki Takahashi

Abstract

We 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 Info

Paper provided by Northwestern University, Center for Mathematical Studies in Economics and Management Science in its series Discussion Papers with number 1086.

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Date of creation: May 1993
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Handle: RePEc:nwu:cmsems:1086

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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. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  3. Hart, Oliver D., 1980. "Perfect competition and optimal product differentiation," Journal of Economic Theory, Elsevier, vol. 22(2), pages 279-312, April.
  4. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  5. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  6. Howitt, Peter & McAfee, R Preston, 1988. "Stability of Equilibria with Externalities," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 261-77, May.
  7. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December.
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  8. Moore, Bartholomew J, 1993. "Least-Squares Learning and the Stability of Equilibria with Externalities," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 197-208, January.
  9. Kiminori Matsuyama, 1990. "Increasing Returns, Industrialization and Indeterminacy of Equilibrium," Discussion Papers 878, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  10. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  11. repec:fth:stanho:e-92-18 is not listed on IDEAS
  12. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  13. Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December.
  14. Novshek, William & Sonnenschein, Hugo, 1978. "Cournot and Walras equilibrium," Journal of Economic Theory, Elsevier, vol. 19(2), pages 223-266, December.
  15. Krugman, Paul, 1991. "History and Industry Location: The Case of the Manufacturing Belt," American Economic Review, American Economic Association, vol. 81(2), pages 80-83, May.
  16. Matsuyama, Kiminori, 1992. "A Simple Model of Sectoral Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 375-88, April.
  17. Garcia-Mila, Teresa & McGuire, Therese J., 1993. "Industrial mix as a factor in the growth and variability of states' economies," Regional Science and Urban Economics, Elsevier, vol. 23(6), pages 731-748, December.
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Citations

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Cited by:
  1. Nicholas Sheard, 2012. "Regional policy in a multiregional setting: when the poorest are hurt by subsidies," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 148(2), pages 403-423, June.
  2. Philippe Martin, 2000. "The Role of Public Policy in the Process of Regional Convergence," Sciences Po publications info:hdl:2441/9328, Sciences Po.
  3. Dietmar Harhoff, 1999. "Firm Formation And Regional Spillovers - Evidence From Germany," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 8(1-2), pages 27-55.
  4. Döring, Thomas, 2005. "Räumliche Externalitäten von Wissen und ihre Konsequenzen für die Ausgestaltung des Finanzausgleichs," Forschungs- und Sitzungsberichte der ARL: Aufsätze, in: Das föderative System in Deutschland: Bestandsaufnahme, Reformbedarf und Handlungsempfehlungen aus raumwissenschaftlicher Sicht, pages 93-120 Akademie für Raumforschung und Landesplanung (ARL) - Leibniz-Forum für Raumwissenschaften.
  5. Takahashi, Takaaki, 1998. "On the optimal policy of infrastructure provision across regions," Regional Science and Urban Economics, Elsevier, vol. 28(2), pages 213-235, March.
  6. Thomas Brenner, Niels Weigelt, -DISCUSSANT: Gianfranco Guilioni, 2000. "The Evolution Of Industrial Clusters- Simulating Spatial Dynamics," Computing in Economics and Finance 2000 284, Society for Computational Economics.
  7. Thomas Doring & Jan Schnellenbach, 2006. "What do we know about geographical knowledge spillovers and regional growth?: A survey of the literature," Regional Studies, Taylor & Francis Journals, vol. 40(3), pages 375-395.
  8. Haaparanta, Pertti, 1998. "Regional concentration, trade, and welfare," Regional Science and Urban Economics, Elsevier, vol. 28(4), pages 445-463, July.
  9. repec:spo:wpecon:info:hdl:2441/9328 is not listed on IDEAS
  10. Kristian Behrens & Carl Gaigné & Jacques-François Thisse, 2009. "Industry location and welfare when transport costs are endogenous," Working Papers 32349, Institut National de la Recherche Agronomique, France.
  11. Yannis M. Ioannides & George Petrakos, 2000. "Regional Disparities in Greece and the Performance of Crete, Peloponnese and Thessaly," Discussion Papers Series, Department of Economics, Tufts University 0008, Department of Economics, Tufts University.

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