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

Listed author(s):
  • Sylvie Charlot

    ()

    (CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - INRA - Institut National de la Recherche Agronomique - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement)

  • Carl Gaigné

    (CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - INRA - Institut National de la Recherche Agronomique - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement)

  • Frédéric Robert-Nicoud

    (CEPR - Center for Economic Policy Research - CEPR, UNIGE - Université de Genève)

  • Jacques-François Thisse

    (CESAER - Centre d'Economie et de Sociologie Rurales Appliquées à l'Agriculture et aux Espaces Ruraux - INRA - Institut National de la Recherche Agronomique - AgroSup Dijon - Institut National Supérieur des Sciences Agronomiques, de l'Alimentation et de l'Environnement, CEPR - Center for Economic Policy Research - CEPR, UCL - Université Catholique de Louvain, CORE - Center of Operation Research and Econometrics [Louvain] - UCL - Université Catholique de Louvain, CERAS - Centre d'enseignement et de recherche en analyse socio-économique - ENPC - École des Ponts ParisTech)

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.

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Paper provided by HAL in its series Post-Print with number halshs-00754181.

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Length:
Date of creation: Jan 2006
Publication status: Published in Journal of Public Economics, Elsevier, 2006, 90 (1-2), pp.325-347. 〈10.1016/j.jpubeco.2004.12.002〉
Handle: RePEc:hal:journl:halshs-00754181
DOI: 10.1016/j.jpubeco.2004.12.002
Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754181
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  1. Robert-Nicoud, Frederic & Sbergami, Federica, 2004. "Home-market vs. vote-market effect: Location equilibrium in a probabilistic voting model," European Economic Review, Elsevier, vol. 48(1), pages 155-179, February.
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  3. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669 Elsevier.
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  6. 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.
  7. 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.
  8. I. M. D. Little, 1949. "The Foundations Of Welfare Economics," Oxford Economic Papers, Oxford University Press, vol. 1(2), pages 227-246.
  9. J.Peter Neary, 2001. "Of Hype and Hyperbolas: Introducing the New Economic Geography," Journal of Economic Literature, American Economic Association, vol. 39(2), pages 536-561, June.
  10. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
  11. Ginsburgh, Victor & Papageorgiou, Yorgo & Thisse, Jacques-Francois, 1985. "On existence and stability of spatial equilibria and steady-states," Regional Science and Urban Economics, Elsevier, vol. 15(2), pages 149-158, June.
  12. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
  13. T. de Scitovszky, 1941. "A Note on Welfare Propositions in Economics," Review of Economic Studies, Oxford University Press, vol. 9(1), pages 77-88.
  14. Wildasin, David E., 1986. "Spatial variation of the marginal utility of income and unequal treatment of equals," Journal of Urban Economics, Elsevier, vol. 19(1), pages 125-129, January.
  15. J. V. Henderson (ed.), 2005. "New Economic Geography," Books, Edward Elgar Publishing, number 2772.
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