Resource effect in the Core–Periphery model

María Pilar Martínez-García and José Rodolfo Morales

Spatial Economic Analysis, 2019, vol. 14, issue 3, 339-360

Abstract: This paper develops an extension of Krugman’s Core–Periphery (CP) model by considering a competitive primary sector that extracts a renewable natural resource. The dynamics of the resource give rise to a new dispersion force: the resource effect. If primary goods are not tradable, lower trade costs boost dispersion, and the agglomeration–dispersion transition is sudden or smooth depending on the productivity of the primary sector. Cyclic behaviours arise for high levels of productivity in resource extraction. If primary goods are tradable, in most cases, the symmetric equilibrium goes from stable to unstable as the openness of trade increases.

Date: 2019
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Working Paper: Resource effects in the Core-Periphery model (2016)
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DOI: 10.1080/17421772.2019.1572914

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