Firms’ location Under taste and demand heterogeneity
In this paper we build a quality-augmented version of an economic geography model where consumers have heterogenous tastes for a set of manufacturing varieties. We discuss a footloose capital model and a footloose entrepreneur model. We show that firms selling the goods with higher values select the region hosting the largest number of consumers. Larger countries thus get better access to the higher quality products. We also show that the effect of spatial selection on firms' spatial distribution crucially depends on the properties of the taste distribution across varieties. Finally, we show that taste heterogeneity smooths the agglomeration patterns but that it should be considered neither as a dispersion force nor as an agglomeration force. Indeed, the introduction of taste heterogeneity makes an initially dispersed economy less dispersed and an initially agglomerated economy less agglomerated.
|Date of creation:||01 Dec 2008|
|Contact details of provider:|| Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium)|
Fax: +32 10474304
Web page: http://www.uclouvain.be/core
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:cor:louvco:2008071. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Alain GILLIS)
If references are entirely missing, you can add them using this form.