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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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File URL: http://www.nber.org/papers/w4484.pdf
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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
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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
Note: ITI
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  1. Matsuyama, Kiminori, 1992. "A Simple Model of Sectoral Adjustment," Review of Economic Studies, Wiley Blackwell, vol. 59(2), pages 375-88, April.
  2. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  3. Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  4. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  5. Moore, Bartholomew J, 1993. "Least-Squares Learning and the Stability of Equilibria with Externalities," Review of Economic Studies, Wiley Blackwell, vol. 60(1), pages 197-208, January.
  6. Krugman, Paul, 1991. "History versus Expectations," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 651-67, May.
  7. Howitt, Peter & McAfee, R Preston, 1988. "Stability of Equilibria with Externalities," The Quarterly Journal of Economics, MIT Press, vol. 103(2), pages 261-77, May.
  8. Matsuyama, Kiminori, 1991. "Increasing Returns, Industrialization, and Indeterminacy of Equilibrium," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 617-50, May.
  9. Krugman, Paul, 1991. "History and Industry Location: The Case of the Manufacturing Belt," American Economic Review, American Economic Association, vol. 81(2), pages 80-83, May.
  10. Novshek, William & Sonnenschein, Hugo, 1978. "Cournot and Walras equilibrium," Journal of Economic Theory, Elsevier, vol. 19(2), pages 223-266, December.
  11. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  12. Teresa Garcia-Milà & Therese J. McGuire, 1992. "Industrial mix as a factor in the growth and variability of States' economies," Economics Working Papers 9, Department of Economics and Business, Universitat Pompeu Fabra.
  13. Hart, Oliver D., 1980. "Perfect competition and optimal product differentiation," Journal of Economic Theory, Elsevier, vol. 22(2), pages 279-312, April.
  14. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  15. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  16. Matsuyama, Kiminori, 1992. "The market size, entrepreneurship, and the big push," Journal of the Japanese and International Economies, Elsevier, vol. 6(4), pages 347-364, December.
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