Template-Type: ReDIF-Paper 1.0

Author-Name:  Stephan Russek
Author-X-Name-First: Stephan
Author-X-Name-Last: Russek

Title: "Taste heterogeneity, labor mobility and economic geography" - A critical reconsideration and correction

Abstract: This article reconsiders the linear new economic geography model under heterogeneous
agents developed by Tabuchi and Thisse (2002) by applying an analytical
technique introduced by Ludema and Wooton (1999). Two problematic aspects are
identified first, the bifurcation pattern for countries which differ in amenities is incorrect.
I show that the degree of agglomeration is highest when trade costs are high.
Besides this minor problem, the second critical issue concerns the welfare analysis.
It is shown in this note that this model exhibits a latent tendency for overagglomeration
when trade costs are high and underagglomeration when trade costs are low,
bringing it in line with other welfare analyses of new economic geography models.
Length:  13 pages
Creation-Date:  2007-08
File-URL: http://www.bgpe.de/texte/DP/029_russek.pdf
File-Format: Application/pdf
File-Function: First version, 2007
Number: 029
Classification-JEL: R13, O15, O18
Keywords: Agglomeration, Migration, Welfare, New economic geography
Handle: RePEc:bav:wpaper:029_russek