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Agglomeration and welfare: The core-periphery model in the light of Bentham, Kaldor, and Rawls

Author

Listed:
  • Sylvie Charlot

    (CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - ENESAD - Etablissement National d'Enseignement Supérieur Agronomique de Dijon - INRA - Institut National de la Recherche Agronomique)

  • Carl Gaigné

    (CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - ENESAD - Etablissement National d'Enseignement Supérieur Agronomique de Dijon - INRA - Institut National de la Recherche Agronomique)

  • Frédéric Robert-Nicoud

    (CEPR - Center for Economic Policy Research, UNIGE - Université de Genève = University of Geneva)

  • Jacques-François Thisse

    (CEPR - Center for Economic Policy Research, UCL - Université Catholique de Louvain = Catholic University of Louvain, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain = Catholic University of Louvain, CERAS - Centre d'enseignement et de recherche en analyse socio-économique - ENPC - École nationale des ponts et chaussées - CNRS - Centre National de la Recherche Scientifique, CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - ENESAD - Etablissement National d'Enseignement Supérieur Agronomique de Dijon - INRA - Institut National de la Recherche Agronomique)

Abstract

The objective of this paper is to apply different welfare approaches to the canonical model developed by Krugman, with the aim of comparing the only two possible market outcomes, i.e. agglomeration and dispersion. More precisely, we use the potential Pareto improvement criteria, as well as the utilitarian and Rawlsian welfare functions. No clear answer emerges for the following two reasons: (i) in general, there is indetermination when compensation schemes are used and (ii) the best outcome heavily depends on societal values regarding inequalities across individuals. However, simulations undertaken for plausible values of the main parameters suggest that there might be excessive agglomeration.

Suggested Citation

  • Sylvie Charlot & Carl Gaigné & Frédéric Robert-Nicoud & Jacques-François Thisse, 2006. "Agglomeration and welfare: The core-periphery model in the light of Bentham, Kaldor, and Rawls," Post-Print halshs-00754181, HAL.
    • Handle: RePEc:hal:journl:halshs-00754181
    DOI: 10.1016/j.jpubeco.2004.12.002
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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