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Competition, market access and economic geography: Structural estimation and predictions for France

Abstract : This paper evaluates the role of competition and input-output market access in shaping the geography of economic activity. In a first step, we develop a multi-region multi-industry economic geography model under Cournot competition, of which we estimate the parameter values from French data. We then turn to simulations to see whether a core-periphery equilibrium exists, even with strategic interactions among firms. We show that the marginal profits and mark-ups of firms are greater in both core and peripheral regions than in between, due to a subtle interplay between competition and market-access forces. Production is mostly monocentric, however, and profits are higher in the core, which should produce further concentration. We finally show that policy-makers face a difficult trade-off: lowering inter-regional trade costs reduces disparities between regions, but increases intra-regional inequality.
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https://hal-pjse.archives-ouvertes.fr/halshs-00754508
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Submitted on : Tuesday, November 20, 2012 - 9:50:15 AM
Last modification on : Sunday, June 26, 2022 - 11:57:26 AM

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Pierre-Philippe Combes, Miren Lafourcade. Competition, market access and economic geography: Structural estimation and predictions for France. Regional Science and Urban Economics, Elsevier, 2011, 41 (6), pp.508-524. ⟨10.1016/j.regsciurbeco.2011.03.012⟩. ⟨halshs-00754508⟩

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