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The role of centrality and market size in a four-region asymmetric new economic geography model

Author

Listed:
  • Pasquale Commendatore

    (University of Naples ‘Federico II’)

  • Ingrid Kubin

    (Vienna University of Economics and Business Administration)

  • Pascal Mossay

    (Newcastle University, UK, and CORE, Belgium)

  • Iryna Sushko

    (National Academy of Sciences of Ukraine
    Kyiv School of Economics)

Abstract

In this paper, we put forward a four-region new economic geography footloose entrepreneur model in which regions are differentiated by their size and their geographical position along a line. There are two distinct trade blocs, each of them consisting of a pair of regions. Direct and indirect trade between all regions is allowed, whereas factor mobility can occur only between regions of the same bloc. Given this more general geographical structure, as compared to previous studies, we are able to disentangle two manifestations of the market access effect: firms can take advantage of locating both in a more central region (centrality effect) and/or in a bigger region (local market size effect). The model is able to generate a plethora of long-term outcomes, including four equilibria with full agglomeration in each trade bloc that can be ranked by factor owners. Equilibria where industry is dispersed or agglomerated in a bloc and dispersed in the other one, are also possible as well as more complex attractors. Finally, by allowing direct and indirect trade between regions, we are able to look at the effect of trade integration on transit traffic by evaluating in a preliminary analysis the consequences of policies aiming at limiting transport volumes in a model with shifting industry.

Suggested Citation

  • Pasquale Commendatore & Ingrid Kubin & Pascal Mossay & Iryna Sushko, 2017. "The role of centrality and market size in a four-region asymmetric new economic geography model," Journal of Evolutionary Economics, Springer, vol. 27(5), pages 1095-1131, November.
    • Handle: RePEc:spr:joevec:v:27:y:2017:i:5:d:10.1007_s00191-017-0540-6
    DOI: 10.1007/s00191-017-0540-6
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    Cited by:

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    More about this item

    Keywords

    New economic geography; Market access; Centrality; Transit traffic; Industrial agglomeration; Two-dimensional piecewise smooth map; Local and global dynamics;
    All these keywords.

    JEL classification:

    • C62 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Existence and Stability Conditions of Equilibrium
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F2 - International Economics - - International Factor Movements and International Business
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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