A Generalized Variable Elasticity of Substitution Model of New Economic Geography
Sylvain Barde ()
No 2008-33, Sciences Po publications from Sciences Po
This paper analyses the methodology developed by Behrens and Murata (2007) to introduce variable mark-ups into models of monopolistic competition. Their risk- aversion explanation to the presence of ¯xed mark-ups in the Dixit and Stiglitz (1977) model is validated; however, we show that their constant absolute risk aversion solution ignores existing mechanisms found in the new Keynesian literature. From these we develop a model of new economic geography with a variable elasticity of substitution and variable mark-ups consistent with Behrens and Murata (2007). However, we argue that from both a theoretical and empirical perspective this new Keynesian approach is preferable to the solution of Behrens and Murata (2007).
Keywords: new economic geography; variable mark-ups; monopolistic competition; flexible varieties aggregator (search for similar items in EconPapers)
JEL-codes: D43 F12 L12 R12 R13 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Working Paper: A Generalised Variable Elasticity of Substitution Model of New Economic Geography (2008)
Working Paper: A Generalized Variable Elasticity of Substitution Model of New Economic Geography (2008)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:spo:wpmain:info:hdl:2441/7348
Access Statistics for this paper
More papers in Sciences Po publications from Sciences Po Contact information at EDIRC.
Bibliographic data for series maintained by Spire @ Sciences Po Library ().