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A model of economic geography with demand pull and congestion costs

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  • Olga Alonso-Villar

    () (Universidade de Vigo)

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).

Suggested Citation

  • Olga Alonso-Villar, 2006. "A model of economic geography with demand pull and congestion costs," Working Papers 56, ECINEQ, Society for the Study of Economic Inequality.
  • Handle: RePEc:inq:inqwps:ecineq2006-56
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    File URL: http://www.ecineq.org/milano/WP/ECINEQ2006-56.pdf
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    References listed on IDEAS

    as
    1. Olga Alonso-Villar, 2001. "Metropolitan areas and public infrastructure," Investigaciones Economicas, Fundación SEPI, vol. 25(1), pages 139-169, January.
    2. Paul Cheshire & Edward Malecki, 2003. "Growth, development, and innovation: A look backward and forward," Economics of Governance, Springer, pages 249-267.
    3. 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.
    4. 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.
    5. 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.
    6. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    7. Michael Ostrovsky & Michael Schwarz, 2005. "Adoption of Standards Under Uncertainty," RAND Journal of Economics, The RAND Corporation, vol. 36(4), pages 816-832, Winter.
    8. 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.
    9. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Economics of Governance, Springer, pages 197-228.
    10. Picard, Pierre M. & Zeng, Dao-Zhi, 2005. "Agricultural sector and industrial agglomeration," Journal of Development Economics, Elsevier, pages 75-106.
    11. Picard, Pierre M. & Zeng, Dao-Zhi, 2005. "Agricultural sector and industrial agglomeration," Journal of Development Economics, Elsevier, pages 75-106.
    12. 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, pages 273-297.
    13. 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, pages 273-297.
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    Cited by:

    1. Fabien Candau, 2011. "Is Agglomeration Desirable?," Annals of Economics and Statistics, GENES, pages 203-227.
    2. 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.
    3. Marian Rizov, 2011. "Is there a limit to agglomeration? Evidence from productivity of Dutch firms," ERSA conference papers ersa11p231, European Regional Science Association.
    4. 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.
    5. Schaeffer, Y. & Charlot, S., 2012. "Inequality aversion, income redistribution and economic geography," Working Papers 201204, Grenoble Applied Economics Laboratory (GAEL).

    More about this item

    Keywords

    Congestion costs; demand pull; urban concentration; transport costs.;

    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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