Home Goods and Regional Price Indices: A Perspective from New Economic Geography

Jens Südekum ()
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Jens Südekum: Universität Konstanz
Authors registered in the RePEc Author Service: Jens Suedekum

No 109, Departmental Discussion Papers from University of Goettingen, Department of Economics

Abstract: In standard models of New Economic Geography the overall regional price index in the centre is lower than in the periphery, because trade in manufacturing imposes transportation costs whereas trade in agriculture is assumed to be costless. Since real world observations suggest higher overall CPIs in the centre than in the periphery, this paper presents a model where a home goods sector is added. The model is able to explain a sustainable core-periphery structure with higher aggregate CPI in the centre. This structure can emerge endogenously out of the system itself and does not need to exist initially. Hence, the standard model of New Economic Geography can gain realism by the modification proposed in this paper.

Keywords: Economic Geography; Agglomeration; Home Goods (search for similar items in EconPapers)
JEL-codes: R (search for similar items in EconPapers)
Pages: 15
Date: 2001-07-01
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 (8)

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Persistent link: https://EconPapers.repec.org/RePEc:got:vwldps:109

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