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

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  • Alonso†Villar, Olga

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).

Suggested Citation

Handle: RePEc:eee:paresc:v:87:y:2008:i:2:p:261-277
DOI: 10.1111/j.1435-5957.2007.00160.x
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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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