Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations

Efthymia Kyriakopoulou () and Anastasios Xepapadeas

No 1018, DEOS Working Papers from Athens University of Economics and Business

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 pollution - 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 e ects caused by trade-o s between centripetal and centrifugal forces. The above e ects govern rms� location decisions and, as a result, they de ne the distribution of economic activity across space. We derive the rational expectations equilibrium, which results either in a monocentric or in a polycentric city, and the regulator�s optimum, which results in a bicentric city. We compare the outcomes and characterize the optimal spatial policies.

Keywords: Agglomeration; Space; Pollution; Environmental Policy; Knowledge Spillovers; Transportation Cost (search for similar items in EconPapers)
JEL-codes: Q58 R38 (search for similar items in EconPapers)
Date: 2010
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Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations (2009)
Working Paper: Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:aue:wpaper:1018

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