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Trade is not necessary for agglomeration to arise

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  • Kristian Behrens

    (LATEC - Laboratoire d'Analyse et de Techniques Economiques - UB - Université de Bourgogne - CNRS - Centre National de la Recherche Scientifique)

Abstract

We develop a spatial general equilibrium model in which the absence of trade is an endogenous outcome and we show that trade is not a necessarycondition for agglomeration to arise. More precisely, extending the modeldeveloped by Ottaviano et al. [13], we show that equilibria without tradediffer significantly from those obtained in the presence of trade. Somewhatsurprisingly, equilibrium structures without trade are richer than those withtrade, since partial agglomeration becomes a feasible outcome. Equilibrianow depend on the ratio of mobile to immobile factors and an increase in thatratio triggers a process of spatial agglomeration.

Suggested Citation

  • Kristian Behrens, 2003. "Trade is not necessary for agglomeration to arise," Working Papers hal-01526534, HAL.
  • Handle: RePEc:hal:wpaper:hal-01526534
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01526534
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    References listed on IDEAS

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    1. 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.
    2. Keith Head & Thierry Mayer, 2000. "Non-Europe: The magnitude and causes of market fragmentation in the EU," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 136(2), pages 284-314, June.
    3. 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.
    4. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    5. Belleflamme, Paul & Picard, Pierre & Thisse, Jacques-Francois, 2000. "An Economic Theory of Regional Clusters," Journal of Urban Economics, Elsevier, vol. 48(1), pages 158-184, July.
    6. J. Vernon Henderson, Zmarak Shalizi, and Anthony J. Venables, 2001. "Geography and development," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 81-105, January.
    7. 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.
    8. Tabuchi, Takatoshi & Thisse, Jacques-François, 2002. "Regional Specialization and Transport Costs," CEPR Discussion Papers 3542, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Kristian Behrens, 2003. "International trade and internal geography revisited," Working Papers hal-01526511, HAL.

    More about this item

    Keywords

    Trade; Imperfect competition; Agglomeration; Corner solutions;

    JEL classification:

    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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