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Competition, market access and economic geography: Structural estimation and predictions for France

  • Combes, Pierre-Philippe
  • Lafourcade, Miren

This paper evaluates the role of competition and input–output market access in shaping the geography of economic activity. In a first step, we develop a multi-region multi-industry economic geography model under Cournot competition, of which we estimate the parameter values from French data. We then turn to simulations to see whether a core–periphery equilibrium exists, even with strategic interactions among firms. We show that the marginal profits and mark-ups of firms are greater in both core and peripheral regions than in between, due to a subtle interplay between competition and market-access forces. Production is mostly monocentric, however, and profits are higher in the core, which should produce further concentration. We finally show that policy-makers face a difficult trade-off: lowering inter-regional trade costs reduces disparities between regions, but increases intra-regional inequality.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 41 (2011)
Issue (Month): 6 ()
Pages: 508-524

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Handle: RePEc:eee:regeco:v:41:y:2011:i:6:p:508-524
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