Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls

32 Pages Posted: 6 Jan 2005

See all articles by Sylvie Charlot

Sylvie Charlot

National Institute for Agricultural Research (INRA) - Dijon

Carl Gaigne

French National Institute for Agricultural Research (INRA) - UMR 1302 SMART

Frederic Robert-Nicoud

University of Geneva - Department of Political Economics; Centre for Economic Policy Research (CEPR)

Jacques-François Thisse

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

Date Written: October 2004

Abstract

The objective of this Paper is to apply different welfare approaches to the canonical model developed by Krugman, with the aim of comparing the only two possible market outcomes, i.e., agglomeration and dispersion. More precisely, we use the potential Pareto improvement criteria, as well as the utilitarian and Rawlsian welfare functions. No clear answer emerges for the following two reasons: (i) in general, there is indetermination when compensation schemes are used and (ii) the best outcome heavily depends on societal values regarding inequalities across individuals. However, simulations undertaken for plausible values of the main parameters suggest that there might be excessive agglomeration.

Keywords: Agglomeration, welfare, economic geography, compensation mechanism

JEL Classification: F12, R13

Suggested Citation

Charlot, Sylvie and Gaigne, Carl and Robert-Nicoud, Frederic L. and Thisse, Jacques-François, Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls (October 2004). CEPR Discussion Paper No. 4715. Available at SSRN: https://ssrn.com/abstract=644229

Sylvie Charlot

National Institute for Agricultural Research (INRA) - Dijon ( email )

21065 Dijon Cedex
France

Carl Gaigne

French National Institute for Agricultural Research (INRA) - UMR 1302 SMART ( email )

4 allée Adolphe Bobierre
CS 61103
Rennes Cedex, 35011
France

Frederic L. Robert-Nicoud (Contact Author)

University of Geneva - Department of Political Economics ( email )

40, boulevard du Pont-d'Arve
Geneva 4, CH-1211
Switzerland
+41 22 379 8272 (Phone)
+41 22 379 8293 (Fax)

HOME PAGE: http://www.unige.ch/ses/ecopo/staff/robert/home.html

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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

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