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INCREASING RETURNS AND ECONOMIC GEOGRAPHY

作者: 点击数: 发布日期:2014-04-12

This paper develops a two—region, two—sectorgeneral equilibriun model of location. The location of agricultural productionis fixed, but ionopolistcally competitive manufacturing finns choose theirlocation to maximize profits. If transportation costs are high, returns toscale weak, and the share of spending on manufactured goods low, the incentiveto produce close to the market leads to an equal division of manufacturingbetween the regions. With lower transport costs, stronger scale economies, or ahigher manufacturing share, circular causation sets in: the more manufacturingis located in one region, the larger that region's share of demand, and thisprovides an incentive to locate still more manufacturing there. Thus when theparameters of the economy lie even slightly on one side of a critical"phase boundary", all manufacturing production ends up concentratedin only one region.


INCREASING RETURNS AND ECONOMIC GEOGRAPHY.pdf



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