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A model of economic geography with demand pull and congestion costs

Olga Alonso-Villar

No 56, Working Papers from ECINEQ, Society for the Study of Economic Inequality

Abstract: This paper proposes a simple model of economic geography in which to derive analytical results when jointly considering two centrifugal forces —congestion costs together with the pull demand effect— within the Dixit-Stiglitz-Iceberg framework. In this vein, we develop a unified model with labor mobility that combines some of the features of Tabuchi (1998) with those of Forslid and Ottaviano (2003). We analytically show that when considering the effects of congestion costs, dispersion of economic activity is possible not only at high but also at low transport costs. This result corroborates previous numerical simulations conducted by Tabuchi (1998).

Keywords: Congestion costs; demand pull; urban concentration; transport costs. (search for similar items in EconPapers)
JEL-codes: R12 F12 F15 O18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-ure
Date: 2006
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Journal Article: A model of economic geography with demand-pull and congestion costs (2008) Downloads
Working Paper: A Model of Economic Geography with Demand Pull and Congestion Costs Downloads
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