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Agglomeration and welfare: The core-periphery model in the light of Bentham, Kaldor, and Rawls

  • Charlot, Sylvie
  • Gaigne, Carl
  • Robert-Nicoud, Frederic
  • Thisse, Jacques-Francois

The objective of this paper is to apply different welfare approaches to the canonical model developed by Krugman, with the aim of comparing the only two possible market outcomes, i.e. agglomeration and dispersion. More precisely, we use the potential Pareto improvement criteria, as well as the utilitarian and Rawlsian welfare functions. No clear answer emerges for the following two reasons: (i) in general, there is indetermination when compensation schemes are used and (ii) the best outcome heavily depends on societal values regarding inequalities across individuals. However, simulations undertaken for plausible values of the main parameters suggest that there might be excessive agglomeration.

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Article provided by Elsevier in its journal Journal of Public Economics.

Volume (Year): 90 (2006)
Issue (Month): 1-2 (January)
Pages: 325-347

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Handle: RePEc:eee:pubeco:v:90:y:2006:i:1-2:p:325-347
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505578

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  1. Head, Keith & Mayer, Thierry, 2003. "The Empirics of Agglomeration and Trade," CEPR Discussion Papers 3985, C.E.P.R. Discussion Papers.
  2. OTTAVIANO, Gianmarco & THISSE, Jacques-François, . "Integration, agglomeration and the political economics of factor mobility," CORE Discussion Papers RP 1541, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. OTTAVIANO, Gianmarco & THISSE, Jacques-François, 1999. "Agglomeration and trade revisited," CORE Discussion Papers 1999041, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
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  6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  7. Victor Ginsburgh & Yorgo Papageorgiou & Jacques-François Thisse, 1985. "On existence and stability of spatial equilibria and steady-states," ULB Institutional Repository 2013/99282, ULB -- Universite Libre de Bruxelles.
  8. Robert-Nicoud, Frederic & Sbergami, Federica, 2004. "Home-market vs. vote-market effect: Location equilibrium in a probabilistic voting model," European Economic Review, Elsevier, vol. 48(1), pages 155-179, February.
  9. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
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  11. T. de Scitovszky, 1941. "A Note on Welfare Propositions in Economics," Review of Economic Studies, Oxford University Press, vol. 9(1), pages 77-88.
  12. I. M. D. Little, 1949. "The Foundations Of Welfare Economics," Oxford Economic Papers, Oxford University Press, vol. 1(2), pages 227-246.
  13. J. V. Henderson (ed.), 2005. "New Economic Geography," Books, Edward Elgar Publishing, number 2772.
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  15. Wildasin, David E., 1986. "Spatial variation of the marginal utility of income and unequal treatment of equals," Journal of Urban Economics, Elsevier, vol. 19(1), pages 125-129, January.
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