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A third sector in the core-periphery model: non-tradable goods

Author

Listed:
  • Vasco Leite

    (Faculdade de Economia, Universidade do Porto)

  • Sofia B.S.D. Castro

    (CMUP and Faculdade de Economia, Universidade do Porto)

  • João Correia-da-Silva

    (CEF.UP and Faculdade de Economia, Universidade do Porto)

Abstract

We extend an analytically solvable core-periphery model by introducing a monopolistically competitive sector of non-tradable goods. We study how trade costs affect the spatial distribution of economic activity. Trade costs have no effect when the elasticity of substitution among non-tradable goods is low. In this case, concentration of all production (of tradable and non-tradable goods) is the unique equilibrium. When the elasticity of substitution among non-tradable goods is high, we find two equilibrium configurations: symmetric dispersion of the production of tradable and non-tradable goods, if trade costs are high; and concentration of production of tradable goods with asymmetric dispersion of production of non-tradable goods, if trade costs are low.

Suggested Citation

  • Vasco Leite & Sofia B.S.D. Castro & João Correia-da-Silva, 2009. "A third sector in the core-periphery model: non-tradable goods," FEP Working Papers 352, Universidade do Porto, Faculdade de Economia do Porto.
    • Handle: RePEc:por:fepwps:352
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    Cited by:

    1. is not listed on IDEAS
    2. Cerina, Fabio & Mureddu, Francesco, 2014. "Is agglomeration really good for growth? Global efficiency, interregional equity and uneven growth," Journal of Urban Economics, Elsevier, vol. 84(C), pages 9-22.
    3. Lanaspa, Luis & Sanz-Gracia, Fernando & Vera-Cabello, María, 2016. "The (strong) interdependence between intermediate producer services' attributes and manufacturing location," Economic Modelling, Elsevier, vol. 57(C), pages 1-12.
    4. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.

    More about this item

    Keywords

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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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