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Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations

Efthymia Kyriakopoulou () and Anastasios Xepapadeas ()

No 1017, DEOS Working Papers from Athens University of Economics and Business

Abstract: We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of pollution - and an immobile production factor act as centrifugal forces, while positive knowledge spillovers and iceberg transportation costs act as centripetal forces. We study the agglomeration e ects caused by trade-o s between centripetal and centrifugal forces. The above e ects govern rms� location decisions and, as a result, they de ne the distribution of economic activity across space. We derive the rational expectations equilibrium, which results either in a monocentric or in a polycentric city, and the regulator�s optimum, which results in a bicentric city. We compare the outcomes and characterize the optimal spatial policies.

Keywords: Agglomeration; Space; Pollution; Environmental Policy; Knowledge Spillovers; Transportation Cost (search for similar items in EconPapers)
JEL-codes: R38 Q58 (search for similar items in EconPapers)
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Related works:
Working Paper: Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations (2009) Downloads
Working Paper: Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations
Working Paper: Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations Downloads
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