Modeling Services Sectors’ Agglomeration within a New Economic Geography Model

Center for European, Governance and Economic Development Research Discussion Paper Number 147

28 Pages Posted: 13 Dec 2012

Date Written: December 12, 2012

Abstract

This study investigates whether services sectors’ agglomeration can be explained within a common New Economic Geography model by Krugman and Venables (1996). Special feature of this modeling is to account for the lower importance of intermediate goods received for the services sector, a fact that has been shown in Empirics for the European Union (Krenz (2010)). The results show different strengths of agglomeration for both the industrial and services sector depending on initial values of strength of intra-sectoral and inter-sectoral inputs, consumers’ preferences, scale economies and transport costs. The lower extent of services sectors’ agglomeration seen in Empirics can be explained within the model.

Keywords: agglomeration, services, new economic geography

JEL Classification: L80, R12

Suggested Citation

Krenz, Astrid, Modeling Services Sectors’ Agglomeration within a New Economic Geography Model (December 12, 2012). Center for European, Governance and Economic Development Research Discussion Paper Number 147, Available at SSRN: https://ssrn.com/abstract=2188448 or http://dx.doi.org/10.2139/ssrn.2188448

Astrid Krenz (Contact Author)

University of Goettingen ( email )

Platz der Goettinger Sieben 3
Goettingen, 37073
Germany