The role of centrality and market size in a four-region asymmetric new economic geography model
In this paper, we put forward a four-region new economic geography footloose entrepreneur model in which regions are differentiated by their size and their geographical position along a line. There are two distinct trade blocs, each of them consisting of a pair of regions. Direct and indirect trade between all regions is allowed, whereas factor mobility can occur only between regions of the same bloc. Given this more general geographical structure, as compared to previous studies, we are able to disentangle two manifestations of the market access effect: firms can take advantage of locating both in a more central region (centrality effect) and/or in a bigger region (local market size effect). The model is able to generate a plethora of long-term outcomes, including four equilibria with full agglomeration in each trade bloc that can be ranked by factor owners. Equilibria where industry is dispersed or agglomerated in a bloc and dispersed in the other one, are also possible as well as more complex attractors. Finally, by allowing direct and indirect trade between regions, we are able to look at the effect of trade integration on transit traffic by evaluating in a preliminary analysis the consequences of policies aiming at limiting transport volumes in a model with shifting industry.
KeywordsNew economic geography Market access Centrality Transit traffic Industrial agglomeration Two-dimensional piecewise smooth map Local and global dynamics
JEL ClassificationC62 F12 F2 R12
This work has been prepared within the activities of the EU project COST Action IS1104 “The EU in the new complex geography of economic systems: models, tools and policy evaluation”. The authors are grateful for financial support.
Compliance with Ethical Standards
Conflict of interests
The authors declare that they have no conflict of interest.
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