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A r eview of new Economic Geography models: policies, multiregionality and EU themes

A r eview of new Economic Geography models: policies, multiregionality and EU themes. Pasquale Commendatore Theresa Grafeneder-Weissteiner Ingrid Kubin. Structure of the review. Introduction Basic NEG framework Multiregional models Economic policy Other EU themes Conclusions.

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A r eview of new Economic Geography models: policies, multiregionality and EU themes

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  1. A review of new Economic Geography models: policies, multiregionality and EU themes Pasquale Commendatore TheresaGrafeneder-Weissteiner Ingrid Kubin COST IS1104 Lisbon WG1 Meeting

  2. Structure of the review • Introduction • Basic NEG framework • Multiregional models • Economic policy • Other EU themes • Conclusions COST IS1104 Lisbon WG1 Meeting

  3. Objectives of the review • The review should focus on NEG models which are relevant for the topics and aims of the Action: • multiregional models; in order to study the EU, it is necessary to develop a multi-country; multiregional framework • What are the effects of specific regional policies, • other themes that are crucial to explain EU specific problems and that can be dealt / or have been dealt within the NEG analytical structure. COST IS1104 Lisbon WG1 Meeting

  4. Basic NEG framework • 2 (regions / countries) x 2 (sectors) x 2 (factors of production) • Exogenous trade costs determine agglomeration and dispersion patters (via the interplay of centripetal and centrifugal forces) • Central role of factor migration (workers, capital, entrepreneurs) • Core-Periphery and interior equilibrium (symmetric and asymmetric models) COST IS1104 Lisbon WG1 Meeting

  5. Multi-regionalmodels • Pure 3-region • 2-country 3-region • 2-country 4-region • Exogenous or endogenoustradecosts • Symmetric / Asymmetric COST IS1104 Lisbon WG1 Meeting

  6. 3-Region symmetricmodels • Castro, S. B. S. D., Correia-da-Silva, J., & Mossay, P. (2012); Lopes (2012) • Commendatore & Kubin (2013) • Commendatore, Kubin & Sushko (2013): • More complicatedstructure • 3 C-P equilibria, 1 interiorsymmetric • Unstableasymmetric 3-region equilibria • Stableasymmetric 2-region equilibria • Very ‘sensitive’ to initialconditions COST IS1104 Lisbon WG1 Meeting

  7. 3-region asymmetricequilibria • Krugman (1993): the hubeffect • Baldwin et al. (2003); Forslid (2004), Brϋlhart et al. (2004), Crozet and Koenig-Soubeyran (2004), Ago et al. (2006) • Asymmetrictradecosts can give an advantage to the more connectedregion COST IS1104 Lisbon WG1 Meeting

  8. 2-country 3-region (symmetric) • Home (H) country (2 symmetricregions, h1 and h2); Foreign (F) country (rest of the world) • Krugman and Elizondo (1996): reducingtradecostsfavoursdispersionbetween the tworegions in H [the dispersion force doesnotdependon tradecosts] • Paluzie (2001): reducingtradecostsfavoursagglomeration [the dispersion force depends on tradecosts] • Beherens (2011): followingintegrationpoor (better) domestic infrastructure determinesregional divergence (convergence). COST IS1104 Lisbon WG1 Meeting

  9. 2-country 4-region • Behrens et al. (2007a) • Symmetric 2 Countries (H, F), 4 regions (h1, h2, f1, f2) • 2 Sectors • 2 production factors (mobile betweenregionsskilledworkers, L, fully immobile unskilledworkers, A) • Exogenoustransportcosts • Behrens et al . (2006): partlyendogenoustrasportcosts • Zeng and Zhao (2011) : asymmetricregions COST IS1104 Lisbon WG1 Meeting

  10. Towards a spatial network • Behrens et al. (2005) – Multi-regional CP framework • Behrenset al. (2007b)«the transportation infrastructure between countries is represented by a network along which shipping must occur». • “graph representation of the space economy” COST IS1104 Lisbon WG1 Meeting

  11. Economic policy • Basic compendium Baldwin et al. (2003) “Economic geography and public policy”; • Severalfurthercontributions • Some of the main topics: • Strategic behaviour of localgovernments • Role of a centralgovernment • Policy tools (taxation, subsidies, public consumption, infrastructures, public goods COST IS1104 Lisbon WG1 Meeting

  12. Other EU themes • Demographic change • economic growth • Institutions: • labour markets • legislative system • electoralsystem COST IS1104 Lisbon WG1 Meeting

  13. THANKS FOR YOUR ATTENTION ! COST IS1104 Lisbon WG1 Meeting

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