Competition, market access and economic geography: Structural estimation and predictions for France

Pierre-Philippe Combes and Miren Lafourcade

PSE-Ecole d'économie de Paris (Postprint) from HAL

Abstract: This paper evaluates the role of competition and input-output market access in shaping the geography of economic activity. In a first step, we develop a multi-region multi-industry economic geography model under Cournot competition, of which we estimate the parameter values from French data. We then turn to simulations to see whether a core-periphery equilibrium exists, even with strategic interactions among firms. We show that the marginal profits and mark-ups of firms are greater in both core and peripheral regions than in between, due to a subtle interplay between competition and market-access forces. Production is mostly monocentric, however, and profits are higher in the core, which should produce further concentration. We finally show that policy-makers face a difficult trade-off: lowering inter-regional trade costs reduces disparities between regions, but increases intra-regional inequality.

Keywords: Regional development; Core-periphery; Trade costs; Transport costs (search for similar items in EconPapers)
Date: 2011-11
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Citations: View citations in EconPapers (20)

Published in Regional Science and Urban Economics, 2011, 41 (6), pp.508-524. ⟨10.1016/j.regsciurbeco.2011.03.012⟩

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Journal Article: Competition, market access and economic geography: Structural estimation and predictions for France (2011)
Working Paper: Competition, market access and economic geography: Structural estimation and predictions for France (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:pseptp:halshs-00754508

DOI: 10.1016/j.regsciurbeco.2011.03.012

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