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A model of economic geography with demand-pull and congestion costs

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  • Olga Alonso-Villar

Abstract

This article proposes a simple model of economic geography by which to derive analytical results when jointly considering two centrifugal forces - congestion costs together with the pull demand effect - within the Dixit-Stiglitz-Iceberg framework. In this vein, we develop a unified model with labour mobility that combines some of the features of Tabuchi (1998) with those of Forslid and Ottaviano (2003). We analytically show that when considering the effects of congestion costs, the dispersion of economic activity is possible not only at high, but also at low transport costs. This result corroborates previous numerical simulations conducted by Tabuchi (1998). Copyright (c) 2008 the author(s). Journal compilation (c) 2008 RSAI.

Suggested Citation

  • Olga Alonso-Villar, 2008. "A model of economic geography with demand-pull and congestion costs," Papers in Regional Science, Wiley Blackwell, vol. 87(2), pages 261-276, June.
  • Handle: RePEc:bla:presci:v:87:y:2008:i:2:p:261-276
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    References listed on IDEAS

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    1. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 2002. "Taste heterogeneity, labor mobility and economic geography," Journal of Development Economics, Elsevier, vol. 69(1), pages 155-177, October.
    2. Forslid, Rikard & Haaland, Jan I. & Midelfart Knarvik, Karen Helene, 2002. "A U-shaped Europe?: A simulation study of industrial location," Journal of International Economics, Elsevier, vol. 57(2), pages 273-297, August.
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    7. 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.
    8. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
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    Cited by:

    1. Fabien Candau, 2011. "Is Agglomeration Desirable?," Annals of Economics and Statistics, GENES, issue 101-102, pages 203-227.
    2. Akamatsu, Takashi & Takayama, Yuki, 2009. "A Simplified Approach to Analyzing Multi-regional Core-Periphery Models," MPRA Paper 21739, University Library of Munich, Germany, revised 29 Oct 2009.
    3. Schaeffer, Y. & Charlot, S., 2012. "Inequality aversion, income redistribution and economic geography," Working Papers 201204, Grenoble Applied Economics Laboratory (GAEL).
    4. Corey Lang, 2010. "Heterogeneous transport costs and spatial sorting in a model of New Economic Geography," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 191-202, March.
    5. Rizov, Marian & Oskam, Arie & Walsh, Paul, 2012. "Is there a limit to agglomeration? Evidence from productivity of Dutch firms," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 595-606.

    More about this item

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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