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- Economic geography meets hotelling: a home-sweet-home effectPublication . Castro, Sofia B. S. D.; Correia-da-Silva, João; Gaspar, José M.We propose a 2-region core-periphery model where all agents are inter-regionally mobile and have Hotelling-type heterogeneous preferences for location. The utility penalty from residing in a location that is not the preferred one generates the only dispersive force of the model: the home-sweet-home effect. Different distributions of preferences for location induce different spatial distributions in the long-run depending on the short-run general equilibrium economic geography model that is considered. We study the effect of two of those: the linear and the logit home-sweet-home effects.
- Economic geography meets Hotelling: the home-sweet-home effectPublication . Castro, Sofia B. S. D.; Correia-da-Silva, João; Gaspar, José M.We introduce heterogeneous preferences for location in 2-region core-periphery models, thereby generating an additional dispersive force: the home-sweet-home effect. Different forms of heterogeneity in preferences for location induce different long-run spatial distributions of economic activity, depending on the short-run equilibrium model and the distribution of preferences for location that are considered. Our analysis highlights the importance of the convexity/concavity properties of utility from consumption and utility from location, as functions of the spatial distribution of economic activity.
- Agglomeration patterns in a multi-regional economy without income effectsPublication . Gaspar, José M.; Castro, Sofia B. S. D.; Correia-da-Silva, JoãoWe study the long-run spatial distribution of industry using a multi-region core–periphery model with quasi-linear log utility Pflüger (Reg Sci Urban Econ 34:565–573, 2004). We show that a distribution in which industry is evenly dispersed among some of the regions, while the other regions have no industry, cannot be stable. A spatial distribution where industry is evenly distributed among all regions except one can be stable, but only if that region is significantly more industrialized than the other regions. When trade costs decrease, the type of transition from dispersion to agglomeration depends on the fraction of workers that are mobile. If this fraction is low, the transition from dispersion to agglomeration is catastrophic once dispersion becomes unstable. If it is high, there is a discontinuous jump to partial agglomeration in one region and then a smooth transition until full agglomeration. Finally, we find that mobile workers benefit from more agglomerated spatial distributions, whereas immobile workers prefer more dispersed distributions. The economy as a whole shows a tendency towards overagglomeration for intermediate levels of trade costs.