Takanori Ago (Takasaki City University of Economics) Ikumo Isono (Graduate School of Economics, The University of Tokyo) Takatoshi Tabuchi (Faculty of Economics, The University of Tokyo)
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We show that how spatial evolution is different between the two representative models of economic geography: Krugman (1991 JPE) and Ottaviano et al. (2002 IER). We analyze the impacts of falling transport costs on the spatial distribution of economic activities and welfare for three regions located on a line. In the former model, the central region always has locational advantage and manufacturing workers gain from trade. In the latter model, however, the opposite is true when markets are opened up to trade. This is because the price competition is so keen in the central region that manufacturing sector moves to the peripheral regions, which aggravates the social welfare. We then show that when goods are close substitutes and share of manufacturing is of an intermediate level, the manufacturing activities completely disappears from the central region leading to a full agglomeration in one peripheral region.
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Paper provided by CIRJE, Faculty of Economics, University of Tokyo in its series CIRJE F-Series with number
CIRJE-F-224.
References listed on IDEAS Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002.
"Agglomeration and Trade Revisited,"
International Economic Review,
Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
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OTTAVIANO, Gianmarco & TABUCHI, Takatoshi & THISSE, Jacques-Franois, 1999.
"Agglomeration and trade revisited,"
CORE Discussion Papers
1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
[Downloadable!]
Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-Francois Tissse, 1999.
"Agglomeration and Trade Revisited,"
CIRJE F-Series
CIRJE-F-65, CIRJE, Faculty of Economics, University of Tokyo.
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