A third sector in the core-periphery model: non-tradable goods
AbstractWe extend an analytically solvable core-periphery model by introducing a monopolistically competitive sector of non-tradable goods. We study how trade costs affect the spatial distribution of economic activity. Trade costs have no effect when the elasticity of substitution among non-tradable goods is low. In this case, concentration of all production (of tradable and non-tradable goods) is the unique equilibrium. When the elasticity of substitution among non-tradable goods is high, we find two equilibrium configurations: symmetric dispersion of the production of tradable and non-tradable goods, if trade costs are high; and concentration of production of tradable goods with asymmetric dispersion of production of non-tradable goods, if trade costs are low.
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Bibliographic InfoPaper provided by Universidade do Porto, Faculdade de Economia do Porto in its series FEP Working Papers with number 352.
Length: 37 pages
Date of creation: Dec 2009
Date of revision:
New economic geography; Core-periphery model; Footloose entrepreneur; Nontradable goods;
Other versions of this item:
- Vasco Leite & Sofia Castro & João Correia-da-Silva, 2013. "A third sector in the core-periphery model: non-tradable goods," The Annals of Regional Science, Springer, vol. 50(1), pages 71-108, February.
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-16 (All new papers)
- NEP-GEO-2010-01-16 (Economic Geography)
- NEP-INT-2010-01-16 (International Trade)
- NEP-URE-2010-01-16 (Urban & Real Estate Economics)
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