Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/259935 
Authors: 
Year of Publication: 
2006
Series/Report no.: 
Working Paper No. 2006:22
Publisher: 
Lund University, School of Economics and Management, Department of Economics, Lund
Abstract: 
This paper analyses the political determination of transportation costs in a new economic geography model. In a benchmark case with certainty about where agglomeration takes place, a majority of voters favour economic integration and the resulting equilibrium is an industrialised core and a de-industrialised periphery. Allowing for uncertainty, a high level of trade costs may win the election and maintain the initial distribution of industry. The reason is that a coalition of risk-averse immobile factors of production votes for the status quo due to uncertainty about which region will attract industry if economic integration is pursued. Finally, the standard view that agglomeration is unambiguously beneficial to residents in the industrial centre is challenged by introducing costs of undertaking economic integration.
Subjects: 
footloose entrepreneur model
majority voting
new economic geography
regional policy
JEL: 
F12
F15
R12
Additional Information: 
This paper replaces WP 2005:32.
Document Type: 
Working Paper

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