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A Harmonization of First and Second Natures

  • Pierre M. Picard
  • Dao-Zhi Zeng

    ()

    (CREA, University of Luxembourg)

This paper investigates the joint impact of the first nature and the second nature forces on industry location. Towards this aim, we develop a two-region new economic geography model where local factor congestion and location advantages compete with demand linkages and product market crowding. In particular we study the case of absolute location advantage in a single industry model and the case of comparative advantages in a two-industry model. We characterize the structure of industries and discuss the possibilities of catastrophic changes, endogenous industrial asymmetries and specialization. We find that absolute location advantage are associated with a smooth agglomeration process and comparative advantages with a catastrophic process.

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Paper provided by Center for Research in Economic Analysis, University of Luxembourg in its series CREA Discussion Paper Series with number 09-10.

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Date of creation: 2009
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Handle: RePEc:luc:wpaper:09-10
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