INCREASING RETURNS AND HETEROGENEITY IN A SPATIAL ECONOMY

Pascal Mossay
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Pascal Mossay: Universidad de Alicante

Working Papers. Serie AD from Instituto Valenciano de Investigaciones Económicas, S.A. (Ivie)

Abstract: We study a general equilibrium model of global trade and local migration in a continuous geographical space. Trade is based on the Dixit-Stiglitz model of monopolistic competition. Migration is modelled as a local interaction decision process. Incentives for migration are of two types: homogeneous incentives of the group, associated with the identity of taste for higher utility levels, and heterogeneous incentives, due to idiosyncrasies in location taste. The impact of migration on the regional structure is twofold. First, when driven by utility differentials, it contributes to agglomeration because of the presence of increasing returns. Second, when reflecting heterogeneous individual choices, it fosters regional convergence. Furthermore, the size of agglomerations, when they occur, increases with the taste for variety and the proportion of the manufacturing population, and decreases with transport costs.

Keywords: Heterogeneity; agglomeration; dispersion; monopolistic competition (search for similar items in EconPapers)
JEL-codes: F12 R12 R23 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2003-02
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (36)

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