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A model of economic geography with demand‐pull and congestion costs

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  • Olga Alonso‐Villar
Abstract
. This article proposes a simple model of economic geography by 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 labour 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, the 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). Resumen. Este artículo propone un modelo sencillo de geografía económica con el que obtener resultados analíticos cuando se consideraran conjuntamente dos fuerzas centrífugas –los costos de congestión y el efecto demanda– dentro del marco Dixit‐Stiglitz‐Iceberg. Asimismo, desarrollamos un modelo unificado, con movilidad laboral, que combina algunas de las características de Tabuchi (1998) con las de Forslid y Ottaviano (2003). Analíticamente mostramos que cuando se consideraran los efectos de los costos de congestión, la dispersión de la actividad económica es posible no solamente si los costos de transporte son elevados sino también si éstos son bajos. Este resultado corrobora simulaciones numéricas previas realizadas por Tabuchi (1998).

Suggested Citation

  • Olga Alonso‐Villar, 2008. "A model of economic geography with demand‐pull and congestion costs," Papers in Regional Science, Wiley Blackwell, vol. 87(2), pages 261-276, June.
    • Handle: RePEc:bla:presci:v:87:y:2008:i:2:p:261-276
    DOI: 10.1111/j.1435-5957.2007.00160.x
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    Cited by:

    1. Fabien Candau, 2011. "Is Agglomeration Desirable?," Annals of Economics and Statistics, GENES, issue 101-102, pages 203-227.
    2. Fabien Candau & Michaël Goujon & Jean-François Hoarau & Serge Rey, 2014. "Real exchange rate and competitiveness of an EU's ultra-peripheral region: La Reunion Island," International Economics, CEPII research center, issue 137, pages 1-21.
    3. Akamatsu, Takashi & Takayama, Yuki, 2009. "A Simplified Approach to Analyzing Multi-regional Core-Periphery Models," MPRA Paper 21739, University Library of Munich, Germany, revised 29 Oct 2009.
    4. Olga Alonso-Villar, 2006. "A Reflection On The Effects Of Transport Costs Within The New Economic Geography," Working Papers 57, ECINEQ, Society for the Study of Economic Inequality.
    5. José M. Gaspar, 2018. "A prospective review on New Economic Geography," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 61(2), pages 237-272, September.
    6. Fabien Candau, 2011. "Is Agglomeration Desirable?," Annals of Economics and Statistics, GENES, issue 101-102, pages 203-227.
    7. Corey Lang, 2010. "Heterogeneous transport costs and spatial sorting in a model of New Economic Geography," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 191-202, March.
    8. Rizov, Marian & Oskam, Arie & Walsh, Paul, 2012. "Is there a limit to agglomeration? Evidence from productivity of Dutch firms," Regional Science and Urban Economics, Elsevier, vol. 42(4), pages 595-606.
    9. Schaeffer, Y. & Charlot, S., 2012. "Inequality aversion, income redistribution and economic geography," Working Papers 201204, Grenoble Applied Economics Laboratory (GAEL).

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    More about this item

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure

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