Agglomeration versus product variety: implications for regional inequalities
(2006) Journal of Regional Science — Vol. 46, n° 5, p. 867-880 (2006)
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- Abstract
- We investigate how cross-country differences in firms' fixed set-up costs affect the trade-off between global efficiency and spatial equity. Our analysis reveals that the standard assumption of symmetry in set-up costs masks the existence of an interesting effect: the range of available varieties depends on the spatial distribution of firms. In such a setting, where the market outcome leads to excessive agglomeration in the symmetric case, a planner may opt for asymmetric set-up costs and even more agglomeration. We show that the planner will always favor lower set-up costs in the large country with more agglomeration when the consumer's marginal preference for variety is high, or with less agglomeration when the consumer's marginal preference for variety is low.
- Affiliations
Universit�� du Qu��bec à Montréal Department of Economics
Citations
Behrens, K., & Thisse, J.-F. (2006). Agglomeration versus product variety: implications for regional inequalities. Journal of Regional Science, 46(5), 867-880. https://doi.org/10.1111/j.1467-9787.2006.00487.x (Original work published 2006)