Economic Geography and the Role of Profits

31 Pages Posted: 28 Jun 2002

See all articles by Pierre M. Picard

Pierre M. Picard

Centre de Recherche en Économie Appliquée (CREA); Universite du Luxembourg

Jacques-François Thisse

Catholic University of Louvain (UCL); Centre for Economic Policy Research (CEPR)

Eric Toulemonde

IZA Institute of Labor Economics; Facultés Universitaires Notre-Dame de la Paix (FUNDP) - Faculty of Economics, Management and Social Sciences

Date Written: May 2002

Abstract

In modern economies, the amount of profits distributed to shareholders is far from being negligible. We show that the way profits are distributed among agents matters for the space-economy. For example, the existence of mobile rentiers is sufficient to make the symmetric configuration unstable for all transport cost values and to make partial agglomeration of firms stable. Obviously, to account for profits and for their distribution, the assumption of free entry must be abandoned. So doing, we ignore fixed costs and show that it is imperfect competition more than increasing returns that matters for the formation of agglomeration in economic geography.

Keywords: Economic geography, imperfect competition, product differentiation

JEL Classification: L13, R13

Suggested Citation

Picard, Pierre M. and Thisse, Jacques-François and Toulemonde, Eric, Economic Geography and the Role of Profits (May 2002). CEPR Discussion Paper No. 3385. Available at SSRN: https://ssrn.com/abstract=317682

Pierre M. Picard (Contact Author)

Centre de Recherche en Économie Appliquée (CREA) ( email )

Campus Limpertsberg
162A, avenue de la Faïencerie
Luxembourg, 1511
Luxembourg

Universite du Luxembourg

L-1511 Luxembourg
Luxembourg

Jacques-François Thisse

Catholic University of Louvain (UCL) ( email )

Place des Doyens 1
Louvain-la-Neuve, 1348
Belgium

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Eric Toulemonde

IZA Institute of Labor Economics ( email )

P.O. Box 7240
Bonn, D-53072
Germany

Facultés Universitaires Notre-Dame de la Paix (FUNDP) - Faculty of Economics, Management and Social Sciences ( email )

Rempart de la Vierge 8
B-5000 Namur
Belgium
+32 81 725 313 (Phone)
+32 81 724 840 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
21
Abstract Views
1,023
PlumX Metrics