Modeling agglomeration and dispersion in space: The role of labor migration, capital mobility and vertical linkages

Francesco Di Comite, d'Artis Kancs and Patrizio Lecca

Review of International Economics, 2018, vol. 26, issue 3, 555-577

Abstract: In this paper we investigate the role played by capital mobility, labor migration and input–output linkages in shaping the spatial distribution of economic activity in a spatial computable general equilibrium framework. We identify European Union core and periphery regions based on an accessibility index and simulate the impact of a homogeneous transport shock. Our results suggest that agglomeration patterns are magnified by labor and capital mobility, the latter exerting a stronger influence than the former. Results are more nuanced for vertical linkages, which are associated with more agglomeration in terms of GDP, but more dispersion in terms of number of firms and labor demand. These results shed additional light on location mechanisms in applied general equilibrium applications of the new economic geography (NEG) theory and complement the theoretical NEG literature based on analytically solvable models.

Date: 2018
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https://doi.org/10.1111/roie.12313

Related works:
Working Paper: Modelling of Agglomeration and Dispersion in RHOMOLO (2014)
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