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Regional inequality and product variety

  • BEHRENS, Kristian
  • THISSE, Jacques-François

We investigate how differences in set-up costs of various types affect the trade-off between global effciency and spatial equity and show that the standard assumption of symmetry in ï¬xed costs masks the existence of an interesting effect: the range of available varieties varies depends on the spatial distribution of ï¬rms. In such a setting, even when the market outcome leads to excessive agglomeration under symmetric ï¬xed costs, a planner opts for asymmetric ï¬xed costs and more agglomeration. The reason is that the losses induced by more agglomeration are offset by the gains due to additional product variety.

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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number 2005009.

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Date of creation: 00 Feb 2005
Date of revision:
Handle: RePEc:cor:louvco:2005009
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  1. Charles Engel & John H. Rogers, 1995. "How wide is the border?," International Finance Discussion Papers 498, Board of Governors of the Federal Reserve System (U.S.).
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  4. 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).
  5. Ottaviano, Gianmarco I. P. & Thisse, Jacques-Francois, 2002. "Integration, agglomeration and the political economics of factor mobility," Journal of Public Economics, Elsevier, vol. 83(3), pages 429-456, March.
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  8. Paul Krugman, 1992. "Geography and Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262610868, June.
  9. Jonathan Haskel & Holger C. Wolf, 2001. "The Law of One Price - A Case Study," CESifo Working Paper Series 428, CESifo Group Munich.
  10. Keith Head & Thierry Mayer, 2000. "Non-Europe : The Magnitude and Causes of Market Fragmentation in the EU," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-00267441, HAL.
  11. Ottaviano, Gianmarco I.P. & van Ypersele, Tanguy, 2005. "Market size and tax competition," Journal of International Economics, Elsevier, vol. 67(1), pages 25-46, September.
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