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Increasing Returns And Heterogeneity In A Spatial Economy

  • Pascal Mossay

    (Universidad de Alicante)

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    We study a general equilibrium model of global trade and local migration in a continuous geographical space. Trade is based on the Dixit-Stiglitz model of monopolistic competition. Migration is modelled as a local interaction decision process. Incentives for migration are of two types: homogeneous incentives of the group, associated with the identity of taste for higher utility levels, and heterogeneous incentives, due to idiosyncrasies in location taste. The impact of migration on the regional structure is twofold. First, when driven by utility differentials, it contributes to agglomeration because of the presence of increasing returns. Second, when reflecting heterogeneous individual choices, it fosters regional convergence. Furthermore, the size of agglomerations, when they occur, increases with the taste for variety and the proportion of the manufacturing population, and decreases with transport costs.

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    File URL: http://www.ivie.es/downloads/docs/wpasad/wpasad-2003-04.pdf
    File Function: Fisrt version / Primera version, 2003
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    Paper provided by Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie) in its series Working Papers. Serie AD with number 2003-04.

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    Length: 31 pages
    Date of creation: Feb 2003
    Date of revision:
    Publication status: Published by Ivie
    Handle: RePEc:ivi:wpasad:2003-04
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    1. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
    2. W. A. V. Clark, 1985. "Human Migration," Book Chapters, in: Grant I. Thrall (ed.), Scientific Geography, pages 51 Regional Research Institute, West Virginia University.
    3. Sonnenschein, Hugo, 1982. "Price Dynamics Based on the Adjustment of Firms," American Economic Review, American Economic Association, vol. 72(5), pages 1088-96, December.
    4. Papageorgiou, Yorgo Y & Smith, Terrence R, 1983. "Agglomeration as Local Instability of Spatially Uniform Steady-States," Econometrica, Econometric Society, vol. 51(4), pages 1109-19, July.
    5. Paul Krugman & Anthony J. Venables, 1995. "The Seamless World: A Spatial Model of International Specialization," NBER Working Papers 5220, National Bureau of Economic Research, Inc.
    6. Greenberg, Joseph, 1983. "Local public goods with mobility: Existence and optimality of a general equilibrium," Journal of Economic Theory, Elsevier, vol. 30(1), pages 17-33, June.
    7. Myers, G.M. & Mansoorian, A., 1995. "On the Consequences of Government Objectives for Economies with Mobile Populations," Papers 95-2, York (Canada) - Department of Economics.
    8. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
    9. repec:brs:ecchap:12 is not listed on IDEAS
    10. Sonnenschein, Hugo, 1981. "Price dynamics and the disappearance of short-run profits : An example," Journal of Mathematical Economics, Elsevier, vol. 8(2), pages 201-204, July.
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