Economic Geography and the Role of Profits

Jacques Thisse, Pierre Picard and Eric Toulemonde

No 3385, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: In modern economies, the amount of profits distributed to shareholders is far from being negligible. We show that the way profits are distributed among agents matters for the space-economy. For example, the existence of mobile rentiers is sufficient to make the symmetric configuration unstable for all transport cost values and to make partial agglomeration of firms stable. Obviously, to account for profits and for their distribution, the assumption of free entry must be abandoned. So doing, we ignore fixed costs and show that it is imperfect competition more than increasing returns that matters for the formation of agglomeration in economic geography.

Keywords: Economic geography; Imperfect competition; Product differentiation (search for similar items in EconPapers)
JEL-codes: L13 R13 (search for similar items in EconPapers)
Date: 2002-05
New Economics Papers: this item is included in nep-geo and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (6)

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