Regional inequality and product variety
(2005)
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- Abstract
- We investigate how differences in set-up costs of various types affect the trade-off between global efficiency and spatial equity and show that the standard assumption of symmetry in fixed costs masks the existence of an interesting effect: the range of available varieties varies depends on the spatial distribution of firms. In such a setting, even when the market outcome leads to excessive agglomeration under symmetric fixed costs, a planner opts for asymmetric fixed costs and more agglomeration. The reason is that the losses induced by more agglomeration are offset by the gains due to additional product variety.
- Affiliations
Citations
Behrens, K., & Thisse, J.-F. (2005). Regional inequality and product variety (ECON Discussion Papers 2005/13). https://hdl.handle.net/2078.5/75831