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The Quality-Income effect and the selection of location


  • Bacchiega, Emanuele
  • Minniti, Antonio


We analyze a location-choice model with two vertically differentiated firms and two regions with different consumer income. We find that the high-quality producer settles in the poor region and the low-quality one in the rich region when income disparities are sufficiently high and goods are differentiated enough. This apparently counter-intuitive result is not determined by technology or size issues; rather, it relies on the relationship between regional income disparities and product quality, which we call the "Quality-Income effect."

Suggested Citation

  • Bacchiega, Emanuele & Minniti, Antonio, 2009. "The Quality-Income effect and the selection of location," Journal of Urban Economics, Elsevier, vol. 65(2), pages 209-215, March.
  • Handle: RePEc:eee:juecon:v:65:y:2009:i:2:p:209-215

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    References listed on IDEAS

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