Working Paper: CEPR ID: DP1903
Authors: Gianmarco Ottaviano; Jacques-François Thisse
Abstract: The purpose of this paper is two-fold. First, we present a model of agglomeration and trade that displays the main features of the recent economic geography literature, while allowing for the derivation of analytical results by means of simple algebra. Second, we show how this framework can be used to tackle the following important issues: (i) the impact on agglomeration of alternative pricing policies used in the space-economy, with a special focus on the distinction between segmented and integrated markets; (ii) a forward-looking approach to the dynamics of migration in the process of agglomeration, instead of the simple Marshallian model used so far in the economic geography literature.
Keywords: agglomeration; trade; spatial price policy; monopolistic competition
JEL Codes: F12; L13; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| discriminatory pricing (D49) | different market outcomes (D43) |
| mill pricing (L11) | different market outcomes (D43) |
| uniform delivered pricing (L11) | different market outcomes (D43) |
| spatial price policy (R32) | regional pattern of production and trade (R32) |
| uniform delivered pricing (L11) | welfare and trade intensity (F10) |
| expectations about future economic conditions (E66) | migration patterns (F22) |
| expectations about future economic conditions (E66) | agglomeration (R11) |
| transport cost conditions (L91) | emergence of agglomeration (R32) |