A Chamberlinian Agglomeration Model with External Economies of Scale

Hiroshi Kurata, Ryoichi Nomura and Nobuhito Suga

No 242, Discussion paper series. A from Graduate School of Economics and Business Administration, Hokkaido University

Abstract: We investigate the effects of a reduction in trade costs on industrial location and welfare in an economy with external economies of scale. We propose a Chamberlinian agglomeration model with footloose capital, which is analytically-solvable. With respect to industrial location, we demonstrate that a reduction in trade cost is likely to lead to agglomeration. With respect to welfare, we show that agglomeration makes a country with agglomeration better off, and the country without agglomeration better or worse off, depending on the degree of external economies of scale. We also prove that agglomeration makes the overall economy better off.

Keywords: New economic geography; Agglomeration; Footloose capital; External economies of scale; F12; F15; F21; R12 (search for similar items in EconPapers)
Pages: 25 pages
Date: 2011-08
New Economics Papers: this item is included in nep-geo and nep-ure
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