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Spatial Equilibria: The Case of Two Regions

Kucheryavyy, Konstantin; Lyn, Gary; Rodríguez-Clare, Andrés

Authors

Konstantin Kucheryavyy

Gary Lyn



Abstract

In this paper we characterize the set of equilibria in a generalized version of the canonical two-region economic geography model that nests the class of models in Allen and Arkolakis (2014) as well as Krugman (1991) and features an input-output loop. We provide sufficient conditions for uniqueness of equilibria that-in contrast to the well-know result in Allen and Arkolakis (2014)-allow for positive agglomeration externalities, which concentrate economic activity, even in the absence of congestion effects, which disperse it, and highlight the key role played by three additional parameters: the trade elasticity, which regulates the strength of the dispersion force associated with the decline in the terms of trade caused by migration into a region; trade costs, which weaken this dispersion force by limiting trade across regions; and the importance of the agricultural sector, which pushes against agglomeration forces in manufacturing.

Citation

Kucheryavyy, K., Lyn, G., & Rodríguez-Clare, A. (2024). Spatial Equilibria: The Case of Two Regions. Journal of International Economics, 152, Article 104008. https://doi.org/10.1016/j.jinteco.2024.104008

Journal Article Type Article
Acceptance Date Nov 10, 2023
Online Publication Date Oct 15, 2024
Publication Date 2024-11
Deposit Date Sep 19, 2024
Publicly Available Date Apr 16, 2026
Journal Journal of International Economics
Print ISSN 0022-1996
Electronic ISSN 1873-0353
Publisher Elsevier
Peer Reviewed Peer Reviewed
Volume 152
Article Number 104008
DOI https://doi.org/10.1016/j.jinteco.2024.104008
Keywords economic geography; agglomeration externalities; trade JEL Classification: F12; R12; R13; D50
Public URL https://nottingham-repository.worktribe.com/output/39723866
Publisher URL https://www.sciencedirect.com/science/article/pii/S0022199624001351

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This file is under embargo until Apr 16, 2026 due to copyright restrictions.




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