Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls

Sylvie Charlot, (), Carl Gaigne, Frédéric Robert-Nicoud and Jacques Thisse ()

No 4715, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: The objective of this Paper is to apply different welfare approaches to the canonical model developed by Krugman, with the aim of comparing the only two possible market outcomes, i.e. agglomeration and dispersion. More precisely, we use the potential Pareto improvement criteria, as well as the utilitarian and Rawlsian welfare functions. No clear answer emerges for the following two reasons: (i) in general, there is indetermination when compensation schemes are used and (ii) the best outcome heavily depends on societal values regarding inequalities across individuals. However, simulations undertaken for plausible values of the main parameters suggest that there might be excessive agglomeration.

Keywords: agglomeration; compensation mechanism; economic geography; welfare (search for similar items in EconPapers)
JEL-codes: F12 R13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-hpe, nep-pke and nep-ure
Date: 2004-10
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Related works:
Working Paper: Agglomeration and welfare: the core-periphery model in the light of Bentham, Kaldor, and Rawls (2003)
Journal Article: Agglomeration and welfare: The core-periphery model in the light of Bentham, Kaldor, and Rawls (2006)
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