Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations

Efthymia Kyriakopoulou () and Anastasios Xepapadeas

No 54289, Sustainable Development Papers from Fondazione Eni Enrico Mattei (FEEM)

Abstract: We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of emissions - and an immobile production factor act as centrifugal forces, while positive knowledge spillovers and iceberg transportation costs act as centripetal forces. We study the agglomeration effects caused by trade-offs between centripetal and centrifugal forces. The above effects govern firms’ location decisions and as a result, they define the distribution of economic activity across space. We derive the rational expectations equilibrium and the social optimum, compare the outcomes and characterize the optimal spatial policies.

Keywords: Environmental; Economics; and; Policy (search for similar items in EconPapers)
Pages: 44
Date: 2009-10
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Citations: View citations in EconPapers (2)

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Related works:
Working Paper: Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations (2010)
Working Paper: Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:ags:feemdp:54289

DOI: 10.22004/ag.econ.54289

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