Abstract
We extend an analytically solvable core-periphery model by introducing a monopolistically competitive sector of non-tradable goods that is mobile across regions. We find that when the elasticity of substitution among non-tradable goods is very low, there is agglomeration of all the production (of both tradable and non-tradable goods). When the elasticity of substitution among non-tradable goods is sufficiently high (“no black-hole” condition), then there is symmetric dispersion of all the production, if trade costs are high; or full agglomeration of the production of tradable goods with partial agglomeration of the production of non-tradable goods, if trade costs are low.
JEL codes
- F12: Models of Trade with Imperfect Competition and Scale Economies • Fragmentation
- R12: Size and Spatial Distributions of Regional Economic Activity
Reference
Sofia B. S. D Castro, Joao Correia da silva, and Vasco Leite, “A third sector in the core-periphery model: non-tradable goods”, The Annals of Regional Science, vol. 50, n. 1, February 2013, pp. 71–108.
See also
Published in
The Annals of Regional Science, vol. 50, n. 1, February 2013, pp. 71–108