The Footloose Entrepreneur model with a finite number of equidistant regions

Abstract

We study the Footloose Entrepreneur model with a finite number of equidistant regions, focusing on the analysis of stability of three types of long-run equilibria: agglomeration, dispersion and partial dispersion. We find that, as the number of regions increases, there is more tendency for agglomeration and less tendency for dispersion. In the limit, as the number of regions tends to infinity, agglomeration becomes the unique stable equilibrium. Our conclusions are robust to any dependence of the total number of entrepreneurs and unskilled workers on the number of regions. Numerical evidence suggests that industry cannot disperse evenly among two regions when other regions have no industry. Finally, we introduce region heterogeneity in unskilled labour and obtain a more general condition for stability of agglomeration. We then study the impacts of regional asymmetries and find that having more unskilled workers in the core (or less in the periphery) increases the tendency for agglomeration.

Agglomeration patterns in a multi-regional economy without income effects

“…Theorem 1 provides analytical confirmation of the numerical evidence presented by Fujita et al (1999), Castro et al (2012), and Gaspar et al (2013). These authors used Core-Periphery models with 3 or more regions to provide numerical evidence that boundary dispersion with k = 2 is always unstable.…”

“…2 Moreover, we are able to study how the type of transition from dispersion to agglomeration, as trade costs decrease, depends on the global size of the inter-regionally immobile (unskilled) workforce relative to the mobile (skilled) workforce. Castro et al (2012) and Gaspar et al (2013) provided numerical evidence that, in the 3-region CP model and the 3-region FE model, a region without industry and two evenly populated regions cannot be a stable outcome. We provide an analytical confirmation of this result in the n-region QL model: at least one empty region paired with a symmetric distribution of industry among the other regions cannot be a stable outcome.…”

Production externalities and dispersion process in a multi-region economy

“…illustrate that the timing of agglomeration varies with the structure of G. If every region has the same interaction level to different regions, we can assume that G takes the following form: .11) This setup is akin to equidistant geographical networks considered by, e.g., Gaspar et al (2018Gaspar et al ( , 2019. This economy can be thought as an "almost connected economy," since the payoff in a region is invariant under the permutation of mobile workers in the other regions.…”

A propos Brexit: on the breaking up of integration areas – an NEG analysis

“…In the literature, there are a few linear three-region NEG models that mostly assume symmetric trade costs: Castro, Correia-da-Silva, and Mossay (2012) and Gaspar, Castro, and Correia-da-Silva (2019) consider, respectively, the standard CP model and the FE model with isoelastic demand functions extended to the case of several regions larger than two, which are equally spaced along a circle. Tabuchi, Thisse, and Zeng (2005) consider an n-region economy where in each region a city emerges, that is, it is characterized by a positive share of the mobile factor (workers).…”