On Economic Geography in Economic Theory: Increasing Returns and Pecuniary Externalities

Posted: 29 Feb 2008

See all articles by Gianmarco I.P. Ottaviano

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Jacques-François Thisse

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

Date Written: April 2001

Abstract

Our objective is twofold. First, we show why there is a spatial question in economic theory - why a free competitive market is unable to cope with agglomeration and regional imbalance in the absence of market distortions. Second, using a new and simple model, we review what has been accomplished in economic theory during the 1990s when due allowance is given to increasing returns, while market structure is given by monopolistic competition.

Keywords: economic geography, increasing returns, externalities

Suggested Citation

Ottaviano, Gianmarco I.P. and Thisse, Jacques-François, On Economic Geography in Economic Theory: Increasing Returns and Pecuniary Externalities (April 2001). Journal of Economic Geography, Vol. 1, Issue 2, pp. 153-179, 2001. Available at SSRN: https://ssrn.com/abstract=916793

Gianmarco I.P. Ottaviano (Contact Author)

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )

Via Gobbi 5
Milan, 20136
Italy

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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