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Self-Defeating Regional Concentration

  • Kiminori Matsuyama
  • Takaaki Takahashi

We present a simple model of a two-region economy in which undesirable concentration may occur. With freedom to choose where to live, individuals in this economy concentrate into one region in their pursuit of better life, and end up becoming worse off. We characterize the conditions under which such self-defeating concentration occurs in terms of a few key parameters, such as economies of scale in nontradeable service sectors, regional differences in labor productivity in tradeable goods sectors, and substitutability of tradeable goods in consumption.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4484.

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Date of creation: Oct 1993
Date of revision:
Publication status: published as Matsuyama, Kiminori & Takahashi, Takaaki, 1998. "Self-Defeating Regional Concentration," Review of Economic Studies, Blackwell Publishing, vol. 65(2), pages 211-34, April.
Handle: RePEc:nbr:nberwo:4484
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