Towards a Unifying Approach of the 'New Economic Geography'

27 Pages Posted: 7 Sep 2006

See all articles by Michael Pflüger

Michael Pflüger

University of Passau; IZA Institute of Labor Economics; German Institute for Economic Research (DIW Berlin)

Jens Suedekum

Heinrich-Heine-University Duesseldorf, Duesseldorf Institute for Competition Economics (DICE); Centre for Economic Policy Research (CEPR); CESifo (Center for Economic Studies and Ifo Institute); Institute for the Study of Labor (IZA)

Date Written: August 2006

Abstract

Models of the new economic geography share a number of common conclusions, but also exhibit notable differences, in particular with respect to the shape of the location pattern and the efficiency of the market equilibrium. This reflects the fact that these models rely heavily on specific functional forms. In this paper we approach the properties of the 'footloose entrepreneur' class of new economic geography models with a unifying framework based on the indirect utility function of mobile agents. This approach has several payoffs. We are able to provide general, yet handy, formulae to determine the break point, the bifurcation pattern and the welfare properties of the market equilibrium. Moreover, an application of this framework allows us to show how specific results in the literature can be reconciled as special cases, thereby allowing us to highlight the origin of their differences.

Keywords: new economic geography, agglomeration, location pattern, regional policy

JEL Classification: R12, R50, F12, F15, F22

Suggested Citation

Pflüger, Michael and Südekum, Jens, Towards a Unifying Approach of the 'New Economic Geography' (August 2006). IZA Discussion Paper No. 2256, Available at SSRN: https://ssrn.com/abstract=928797

Michael Pflüger

University of Passau ( email )

Innstrasse 27
Passau, 94032
Germany

IZA Institute of Labor Economics

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

German Institute for Economic Research (DIW Berlin)

Mohrenstrasse 58
Berlin, 10117
Germany

Jens Südekum (Contact Author)

Heinrich-Heine-University Duesseldorf, Duesseldorf Institute for Competition Economics (DICE) ( email )

Universitaetsstr. 1
Duesseldorf, NRW 40225
Germany

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

CESifo (Center for Economic Studies and Ifo Institute) ( email )

Poschinger Str. 5
Munich, DE-81679
Germany

Institute for the Study of Labor (IZA)

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

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