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Self-Defeating Regional Concentration

Author

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  • Kiminori Matsuyama
  • Takaaki Takahashi

Abstract

We present a two-region economy model, in which inefficienct concentration may occur. Individuals in this economy, even though they prefer evenly distributed across the two regions, concentrate into one region in their pursuit of better life. We characterize the conditions for such self-defeating concentration. What is crucial is the coordination failure between the entry decision of service firms and the migration decision of individuals, generated by the incompleteness of markets, or the lack of opportunity to signal demand and supply for potential services. The argument does not rely on price distortions, congestion externalities, or myopia in migration decisions.

Suggested Citation

  • Kiminori Matsuyama & Takaaki Takahashi, 1993. "Self-Defeating Regional Concentration," Discussion Papers 1086, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    • Handle: RePEc:nwu:cmsems:1086
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    More about this item

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • O11 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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