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Competition, market access and economic geography: Structural estimation and predictions for France

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  • Pierre-Philippe Combes

    () (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - ECM - Ecole Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique - AMU - Aix Marseille Université - EHESS - École des hautes études en sciences sociales, PSE - Paris School of Economics, CEPR - Center for Economic Policy Research - CEPR)

  • Miren Lafourcade

    (PSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - INRA - Institut National de la Recherche Agronomique - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique, PSE - Paris School of Economics, ADIS - Analyse des Dynamiques Industrielles et Sociales - UP11 - Université Paris-Sud - Paris 11 - Département d'Economie)

Abstract

This paper evaluates the role of competition and input-output market access in shaping the geography of economic activity. In a first step, we develop a multi-region multi-industry economic geography model under Cournot competition, of which we estimate the parameter values from French data. We then turn to simulations to see whether a core-periphery equilibrium exists, even with strategic interactions among firms. We show that the marginal profits and mark-ups of firms are greater in both core and peripheral regions than in between, due to a subtle interplay between competition and market-access forces. Production is mostly monocentric, however, and profits are higher in the core, which should produce further concentration. We finally show that policy-makers face a difficult trade-off: lowering inter-regional trade costs reduces disparities between regions, but increases intra-regional inequality.

Suggested Citation

  • Pierre-Philippe Combes & Miren Lafourcade, 2011. "Competition, market access and economic geography: Structural estimation and predictions for France," Post-Print halshs-00754508, HAL.
  • Handle: RePEc:hal:journl:halshs-00754508
    DOI: 10.1016/j.regsciurbeco.2011.03.012
    Note: View the original document on HAL open archive server: https://hal-pjse.archives-ouvertes.fr/halshs-00754508
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    References listed on IDEAS

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    Citations

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    Cited by:

    1. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    2. Diego Puga, 2008. "Agglomeration and cross-border infrastructure," Working Papers 2008-06, Instituto Madrileño de Estudios Avanzados (IMDEA) Ciencias Sociales.
    3. Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Suedekum, Jens, 2017. "Spatial frictions," Journal of Urban Economics, Elsevier, vol. 97(C), pages 40-70.
    4. Miren Lafourcade & Jacques-François Thisse, 2011. "New Economic Geography: The Role of Transport Costs," Chapters, in: André de Palma & Robin Lindsey & Emile Quinet & Roger Vickerman (ed.), A Handbook of Transport Economics, chapter 4, Edward Elgar Publishing.
    5. Pierre-Philippe Combes & Laurent Gobillon, 2014. "The Empirics of Agglomeration Economies," PSE Working Papers halshs-01071761, HAL.
    6. repec:nbp:nbpbik:v:47:y:2016:i:5:p:463-494 is not listed on IDEAS
    7. repec:nbp:nbpbik:v:47:y:2016:i:6:p:463-494 is not listed on IDEAS
    8. Maria Florencia Granato, 2011. "REGIONAL NEW ECONOMIC GEOGRAPHY (refereed paper)," ERSA conference papers ersa10p747, European Regional Science Association.
    9. Pierre-Philippe Combes & Laurent Gobillon, 2014. "The Empirics of Agglomeration Economies," Working Papers halshs-01071761, HAL.
    10. Calfat, Germán & Flôres, R.G. & Rivas, Ana & Granato, M., 2010. "Policy making in asymmetric regional integrations: a methodology for allocating cohesion fund resources," IOB Working Papers 2010.05, Universiteit Antwerpen, Institute of Development Policy (IOB).
    11. repec:eee:retrec:v:63:y:2017:i:c:p:5-12 is not listed on IDEAS

    More about this item

    Keywords

    Regional development; Core-periphery; Trade costs; Transport costs;

    JEL classification:

    • F1 - International Economics - - Trade
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • R4 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Transportation Economics

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