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When Veblen meets Krugman: social network and city dynamics

Author

Listed:
  • Christian Ghiglino

    () (University of Essex)

  • Antonella Nocco

    () (University of Salento)

Abstract

The present paper explores the role of the social structure of suburban areas on city dynamics. We focus on relative concerns in the form of conspicuous consumption and introduce them into a standard economic geography model a la Krugman. We show that the level of social integration within the suburban areas of cities and the level of economic integration across cities are crucial in determining the city sizes. An interesting case arises with moderate trade costs when relatively small shares of income are devoted to the consumption of the differentiated good: if classes of workers are segregated (as in homogenous suburban areas), relative concerns tend to generate dispersed, medium-size cities; when workers of different classes socially interact, relative concerns contribute to foster socially integrated megalopolises. This result shows that keeping-up-with-the-Joneses motives may generate counterintuitive results when agents are able to choose their location.

Suggested Citation

  • Christian Ghiglino & Antonella Nocco, 2017. "When Veblen meets Krugman: social network and city dynamics," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 63(2), pages 431-470, February.
  • Handle: RePEc:spr:joecth:v:63:y:2017:i:2:d:10.1007_s00199-015-0940-5
    DOI: 10.1007/s00199-015-0940-5
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Huali Xiang & Jun Yang & Xi Liu & Jay Lee, 2019. "Balancing Population Distribution and Sustainable Economic Development in Yangtze River Economic Belt of China," Sustainability, MDPI, Open Access Journal, vol. 11(12), pages 1-1, June.
    2. Staab, Manuel, 2019. "The Formation of Social Groups under Status Concern," MPRA Paper 97114, University Library of Munich, Germany.
    3. Sergey Kichko & Pierre M. Picard, 2018. "Heterogeneity in Conformism, Firm Selection, and Home Bias," HSE Working papers WP BRP 187/EC/2018, National Research University Higher School of Economics.
    4. José M. Gaspar & Sofia B. S. D. Castro & João Correia-da-Silva, 2018. "Agglomeration patterns in a multi-regional economy without income effects," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 66(4), pages 863-899, December.
    5. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.
    6. Zhang, Yanjiang & Dai, Xinjun & Yu, Xiaofen & Gao, Nan, 2020. "Urban integration of land-deprived households in China: Quality of living and social welfare," Land Use Policy, Elsevier, vol. 96(C).

    More about this item

    Keywords

    Agglomeration; Conspicuous consumption; City dynamics; Migration; Network effects; Economic geography;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • F22 - International Economics - - International Factor Movements and International Business - - - International Migration
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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