Please use this identifier to cite or link to this item:
Südekum, Jens
Year of Publication: 
Series/Report no.: 
Diskussionsbeiträge 109
In standard models of New Economic Geography the overall regional price index in the centre is lower than in the periphery, because trade in manufacturing imposes transportation costs whereas trade in agriculture is assumed to be costless. Since real world observations suggest higher overall CPIs in the centre than in the periphery, this paper presents a model where a home goods sector is added. The model is able to explain a sustainable core-periphery structure with higher aggregate CPI in the centre. This structure can emerge endogenously out of the system itself and does not need to exist initially. Hence, the standard model of New Economic Geography can gain realism by the modification proposed in this paper.
Document Type: 
Working Paper

Files in This Item:
129.24 kB

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.