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Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls

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Listed:
  • Thisse, Jacques-François
  • Robert-Nicoud, Frédéric
  • Charlot, Sylvie
  • Gaigné, Carl

Abstract

The objective of this Paper is to apply different welfare approaches to the canonical model developed by Krugman, with the aim of comparing the only two possible market outcomes, i.e. agglomeration and dispersion. More precisely, we use the potential Pareto improvement criteria, as well as the utilitarian and Rawlsian welfare functions. No clear answer emerges for the following two reasons: (i) in general, there is indetermination when compensation schemes are used and (ii) the best outcome heavily depends on societal values regarding inequalities across individuals. However, simulations undertaken for plausible values of the main parameters suggest that there might be excessive agglomeration.

Suggested Citation

  • Thisse, Jacques-François & Robert-Nicoud, Frédéric & Charlot, Sylvie & Gaigné, Carl, 2004. "Agglomeration and Welfare: The Core-Periphery Model in the Light of Bentham, Kaldor and Rawls," CEPR Discussion Papers 4715, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:4715
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    More about this item

    Keywords

    Agglomeration; Welfare; Economic geography; Compensation mechanism;
    All these keywords.

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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