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Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations

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  • Kyriakopoulou, Efthymia
  • Xepapadeas, Anastasios
Abstract
We explain the spatial concentration of economic activity, in a model of economic geography, when the cost of environmental policy - which is increasing in the concentration of emissions - and an immobile production factor act as centrifugal forces, while positive knowledge spillovers and iceberg transportation costs act as centripetal forces. We study the agglomeration effects caused by trade-offs between centripetal and centrifugal forces. The above effects govern firms’ location decisions and as a result, they define the distribution of economic activity across space. We derive the rational expectations equilibrium and the social optimum, compare the outcomes and characterize the optimal spatial policies.

Suggested Citation

  • Kyriakopoulou, Efthymia & Xepapadeas, Anastasios, 2009. "Environmental Policy, Spatial Spillovers and the Emergence of Economic Agglomerations," Sustainable Development Papers 54289, Fondazione Eni Enrico Mattei (FEEM).
    • Handle: RePEc:ags:feemdp:54289
    DOI: 10.22004/ag.econ.54289
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    Cited by:

    1. Costantini, Valeria & Mazzanti, Massimiliano & Montini, Anna, 2013. "Environmental performance, innovation and spillovers. Evidence from a regional NAMEA," Ecological Economics, Elsevier, vol. 89(C), pages 101-114.
    2. Dean M. Hanink, 2010. "Perspectives on Regional Change: A Review Essay on Handbook of Regional Growth and Development Theories," Growth and Change, Wiley Blackwell, vol. 41(1), pages 3-27, March.

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    More about this item

    Keywords

    Environmental Economics and Policy;

    JEL classification:

    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location
    • Q5 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics
    • H2 - Public Economics - - Taxation, Subsidies, and Revenue

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