Competition, market access and economic geography: Structural estimation and predictions for France

Journal article: This paper evaluates the role of competition and input-output market access in shaping the geography of economic activity. In a first step, we develop a multi-region multi-industry economic geography model under Cournot competition, of which we estimate the parameter values from French data. We then turn to simulations to see whether a core-periphery equilibrium exists, even with strategic interactions among firms. We show that the marginal profits and mark-ups of firms are greater in both core and peripheral regions than in between, due to a subtle interplay between competition and market-access forces. Production is mostly monocentric, however, and profits are higher in the core, which should produce further concentration. We finally show that policy-makers face a difficult trade-off: lowering inter-regional trade costs reduces disparities between regions, but increases intra-regional inequality.

Author(s)

Pierre-Philippe Combes, Miren Lafourcade

Journal
  • Regional Science and Urban Economics
Date of publication
  • 2011
Keywords JEL
F1 O1 R3 R4
Keywords
  • Regional development
  • Core-periphery
  • Trade costs
  • Transport costs
Pages
  • 508-524
Version
  • 1
Volume
  • 41