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Spatial inequality and urban costs: Revisiting the home market effect

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  • Yiming Zhou

Abstract

This paper investigates how the interactions between product differentiation, transport costs, and urban costs determine the spatial inequality in a general‐equilibrium model. We shed light on the interrelation between different definitions of home market effect (HME) in literature. While the wages in the large region are always higher, the HME in industrial distribution occurs in a limited range of parameters, implying that the HME in factor price is more pervasive. Moreover, we show that the reverse HME is the more common outcome. It indicates that neglecting urban costs in theoretical methodologies tends to overestimate the existence of HME. We also disclose how a change in urban costs or transport costs affects regional inequalities and welfare.

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  • Yiming Zhou, 2019. "Spatial inequality and urban costs: Revisiting the home market effect," Journal of Regional Science, Wiley Blackwell, vol. 59(2), pages 302-321, March.
    • Handle: RePEc:bla:jregsc:v:59:y:2019:i:2:p:302-321
    DOI: 10.1111/jors.12414
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    Cited by:

    1. Hangtian Xu & Yiming Zhou, 2023. "Inter-industry trade and heterogeneous firms: country size matters," The Japanese Economic Review, Springer, vol. 74(1), pages 57-81, January.

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