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A Model of Economic Geography with Demand Pull and Congestion Costs

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  • Olga ALONSO-VILLAR

Abstract

This paper proposes a simple model of economic geography in which to derive analytical results when jointly considering two centrifugal forces —congestion costs together with the pull demand effect— within the Dixit-Stiglitz-Iceberg framework. In this vein, we develop a unified model with labor mobility that combines some of the features of Tabuchi (1998) with those of Forslid and Ottaviano (2003). We analytically show that when considering the effects of congestion costs, dispersion of economic activity is possible not only at high but also at low transport costs. This result corroborates previous numerical simulations conducted by Tabuchi (1998).
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Suggested Citation

  • Olga ALONSO-VILLAR, "undated". "A Model of Economic Geography with Demand Pull and Congestion Costs," Regional and Urban Modeling 284100003, EcoMod.
  • Handle: RePEc:ekd:002841:284100003
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    References listed on IDEAS

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    1. Krugman, Paul & Elizondo, Raul Livas, 1996. "Trade policy and the Third World metropolis," Journal of Development Economics, Elsevier, vol. 49(1), pages 137-150, April.
    2. Rikard Forslid & Gianmarco I.P. Ottaviano, 2003. "An analytically solvable core-periphery model," Journal of Economic Geography, Oxford University Press, vol. 3(3), pages 229-240, July.
    3. Jos van Ommeren & Piet Rietveld, 2007. "Compensation for commuting in imperfect urban markets," Papers in Regional Science, Wiley Blackwell, vol. 86(2), pages 241-259, June.
    4. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Economics of Governance, Springer, vol. 83(1), pages 197-228, October.
    5. Murata, Yasusada & Thisse, Jacques-Francois, 2005. "A simple model of economic geography a la Helpman-Tabuchi," Journal of Urban Economics, Elsevier, vol. 58(1), pages 137-155, July.
    6. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    7. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May.
    8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    9. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    10. Forslid, Rikard & Haaland, Jan I. & Midelfart Knarvik, Karen Helene, 2002. "A U-shaped Europe?: A simulation study of industrial location," Journal of International Economics, Elsevier, vol. 57(2), pages 273-297, August.
    11. Tabuchi, Takatoshi & Thisse, Jacques-Francois, 2002. "Taste heterogeneity, labor mobility and economic geography," Journal of Development Economics, Elsevier, vol. 69(1), pages 155-177, October.
    12. Picard, Pierre M. & Zeng, Dao-Zhi, 2005. "Agricultural sector and industrial agglomeration," Journal of Development Economics, Elsevier, vol. 77(1), pages 75-106, June.
    13. Olga Alonso-Villar, 2001. "Metropolitan areas and public infrastructure," Investigaciones Economicas, Fundación SEPI, vol. 25(1), pages 139-169, January.
    14. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-359, May.
    15. Kristian Behrens, 2006. "Do changes in transport costs and tariffs shape the space-economy in the same way?," Papers in Regional Science, Wiley Blackwell, vol. 85(3), pages 379-399, August.
    16. Moriki Hosoe & Tohru Naito, 2006. "Trans-boundary pollution transmission and regional agglomeration effects-super-," Papers in Regional Science, Wiley Blackwell, vol. 85(1), pages 99-120, March.
    17. Tabuchi, Takatoshi, 1998. "Urban Agglomeration and Dispersion: A Synthesis of Alonso and Krugman," Journal of Urban Economics, Elsevier, vol. 44(3), pages 333-351, November.
    18. Frédéric Robert-Nicoud, 2005. "The structure of simple 'New Economic Geography' models (or, On identical twins)," Journal of Economic Geography, Oxford University Press, vol. 5(2), pages 201-234, April.
    19. Vincent Dupont, 2007. "Do geographical agglomeration, growth and equity conflict?," Papers in Regional Science, Wiley Blackwell, vol. 86(2), pages 193-213, June.
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    Cited by:

    1. Akamatsu, Takashi & Takayama, Yuki, 2009. "A Simplified Approach to Analyzing Multi-regional Core-Periphery Models," MPRA Paper 21739, University Library of Munich, Germany, revised 29 Oct 2009.
    2. Corey Lang, 2010. "Heterogeneous transport costs and spatial sorting in a model of New Economic Geography," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 191-202, March.
    3. Rizov, Marian & Oskam, Arie & Walsh, Paul, 2012. "Is there a limit to agglomeration? Evidence from productivity of Dutch firms," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 595-606.
    4. Schaeffer, Y. & Charlot, S., 2012. "Inequality aversion, income redistribution and economic geography," Working Papers 201204, Grenoble Applied Economics Laboratory (GAEL).
    5. Fabien Candau, 2011. "Is Agglomeration Desirable?," Annals of Economics and Statistics, GENES, issue 101-102, pages 203-227.

    More about this item

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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