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Trade Openness and City Size with Taste Heterogeneity

  • Mauricio Ram�rez Grajeda
  • Willy Cortez Yactayo
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    Abstract This paper incorporates taste heterogeneity, as a dispersion force, into Fujita et al.'s New Economic Geography model. By doing so, agglomeration of both firms and workers is the result of market and non-market interactions. We analyze the outcomes of the original model vis-�-vis the outcomes of its extension. In particular, we assess the impact of international trade openness on cities' size. Two main general predictions arise from such a departure. First, the breakpoint with taste heterogeneity is higher than the breakpoint associated without it. Second, for low levels of trade openness urban agglomeration is attenuated with taste heterogeneity. Finally, based upon particular values of the parameters of the model, market outcomes converge to the optimal social welfare outcomes as taste heterogeneity increases. Ouverture commerciale et tailles des agglom�rations avec h�t�rog�n�it� des gouts R�sum� La pr�sente communication incorpore l'h�t�rog�n�it� des go�ts, en tant que force de dispersion, dans le nouveau mod�le de G�ographie �conomique de Fujita et al. De cette fa�on, l'agglom�ration d'entreprises et de travailleurs constitue l'aboutissement d'interactions commerciales et non commerciales. Nous analysons les r�sultats du mod�le original en fonction de ceux de son extension. Nous �valuons, en particulier, l'impact de l'ouverture commerciale internationale sur la taille des villes. Cette nouvelle orientation donne lieu � deux pr�dictions g�n�rales principales. Premi�rement, le seuil tenant compte de l'h�t�rog�n�it� des go�ts est plus �lev� que le seuil connexe sans cette derni�re. Deuxi�mement, en pr�sence de bas niveaux d'ouverture commerciale, l'agglom�ration urbaine est att�nu�e par l'h�t�rog�n�it� des go�ts. Enfin, en fonction de valeurs particuli�res des param�tres du mod�le, les cons�quences commerciales convergent vers les r�sultats optimaux de l'assistance sociale au fur et � mesure de l'augmentation de l'h�t�rog�n�it� des go�ts. Apertura comercial y tama�o de ciudad con heterogeneidad en los gustos Extracto Este trabajo incorpora la heterogeneidad en los gustos, como una forma de dispersi�n, en el modelo de Nueva Geograf�a Econ�mica de Fujita et al. Por este medio, la aglomeraci�n de empresas y trabajadores es el resultado de interacciones de mercado y de no mercado. Analizamos los resultados del modelo original frente a los resultados de su extensi�n. En particular, evaluamos el impacto de la apertura del comercio internacional sobre el tama�o de las ciudades. Dos predicciones principales surgen de tal desviaci�n. En primer lugar, el punto l�mite con heterogeneidad en los gustos es m�s alto que el punto l�mite asociado sin ella. En segundo lugar, en niveles bajos de apertura comercial, la aglomeraci�n urbana es atenuada con la heterogeneidad en los gustos. Finalmente, basados en valores particulares de los par�metros del modelo, los resultados del mercado convergen con los resultados de bienestar social �ptimos a medida que la heterogeneidad en los gustos aumenta.

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    Article provided by Taylor & Francis Journals in its journal Spatial Economic Analysis.

    Volume (Year): 5 (2010)
    Issue (Month): 3 ()
    Pages: 263-275

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    Handle: RePEc:taf:specan:v:5:y:2010:i:3:p:263-275
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