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Agglomeration patterns in a multi-regional economy without income effects

José Gaspar (), Sofia B.S.D. Castro () and Joao Correia-da-Silva ()
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Sofia B.S.D. Castro: CMUP and Faculty of Economics, University of Porto

FEP Working Papers from Universidade do Porto, Faculdade de Economia do Porto

Abstract: We study the long-run spatial distribution of industry using a multi-region core-periphery model with quasi-linear log utility (Pflüger, 2004). We show that a distribution in which industry is evenly dispersed among some of the regions while the other regions have no industry cannot be stable. A spatial distribution where industry is evenly distributed among all regions except one can be stable, but only if that region is significantly more industrialized than the other regions. When trade costs decrease, the type of transition from dispersion to agglomeration depends on the fraction of workers that are mobile. If this fraction is low, the transition from dispersion to agglomeration is catastrophic once dispersion becomes unstable. If it is high, there is a discontinuous jump to partial agglomeration in one region and then a smooth transition until full agglomeration. Finally, we find that mobile workers benefit from more agglomerated spatial distributions whereas immobile workers prefer more dispersed distributions. The economy as a whole shows a tendency towards over-agglomeration for intermediate levels of trade costs.

Keywords: Core-periphery model; Footloose Entrepreneur; Multiple regions; Welfare (search for similar items in EconPapers)
JEL-codes: R10 R12 R23 (search for similar items in EconPapers)
Pages: 41 pages
Date: 2017-07
New Economics Papers: this item is included in nep-geo, nep-upt and nep-ure
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Journal Article: Agglomeration patterns in a multi-regional economy without income effects (2018) Downloads
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