Determining the Level of Transportation Costs in the Core-Periphery Model: a Majority Voting Approach

Fredrik Gallo ()

No 2005:32, Working Papers from Lund University, Department of Economics

Abstract: We analyse the political determination of transportation costs in an analytically solvable core-periphery model. In a benchmark case with certainty about where agglomeration takes place, we find that a majority of voters prefers low trade costs and the resulting equilibrium is an industrialised core and a de-industrialised periphery. Allowing for uncertainty we show that a high trade cost candidate, that guarantees the initial symmetric equilibrium, may defeat the core-periphery equilibrium candidate. The reason is that a coalition of risk-averse immobile factors of production votes for status quo due to uncertainty about which region that will attract industrial activity.

Keywords: core-periphery model; majority voting; new economic geography; regional policy (search for similar items in EconPapers)
JEL-codes: F12 F15 R12 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2005-05-31
New Economics Papers: this item is included in nep-cdm, nep-geo, nep-int, nep-pol and nep-ure
Note: This paper has been replaced by WP 2006:22 "Resisting Economic Integration when Industry Location is Uncertain"
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:lunewp:2005_032

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