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Economic geography meets Hotelling: the home-sweet-home effect

Sofia B. S. D. Castro (), Joao Correia-da-Silva and José Gaspar ()
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Sofia B. S. D. Castro: University of Porto

Economic Theory, 2022, vol. 73, issue 1, No 6, 183-209

Abstract: Abstract We introduce heterogeneous preferences for location in 2-region core-periphery models, thereby generating an additional dispersive force: the home-sweet-home effect. Different forms of heterogeneity in preferences for location induce different long-run spatial distributions of economic activity, depending on the short-run equilibrium model and the distribution of preferences for location that are considered. Our analysis highlights the importance of the convexity/concavity properties of utility from consumption and utility from location, as functions of the spatial distribution of economic activity.

Keywords: New economic geography; Core-periphery model; Heterogeneous agents; Preferences for location (search for similar items in EconPapers)
JEL-codes: R10 R12 R23 (search for similar items in EconPapers)
Date: 2022
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DOI: 10.1007/s00199-020-01331-8

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