Journal Article

Location equilibrium with endogenous rent seeking

Magnus Wiberg

in Journal of Economic Geography

Volume 9, issue 6, pages 869-887
Published in print November 2009 | ISSN: 1468-2702
Published online March 2009 | e-ISSN: 1468-2710 | DOI: https://dx.doi.org/10.1093/jeg/lbp011
Location equilibrium with endogenous rent seeking

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  • International Trade
  • Urban, Rural, and Regional Economics
  • Analysis of Collective Decision-making

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This article analyzes the location of manufacturing activities when regional policy is determined by endogenous rent seeking. Once lobbying for government transfers to regions is included in an economic geography framework with size asymmetries, the standard prediction that the larger region becomes the core when trade barriers are reduced no longer holds. The establishment of manufacturing production in the economically smaller region is increasing in the level of regional integration once trade becomes freer than a certain threshold value. When free trade prevails, the relocation of industry takes place up to the point where there are as many firms operating in the South as in the North. Furthermore, lobbying slows down the agglomeration process, whereas the home market magnification effect [Krugman (1991, Journal of Political Economy, 99, 483–499)] becomes weaker.

Keywords: economic geography; regional policy; political economy; rent seeking; D72; F12; R12

Journal Article.  7829 words.  Illustrated.

Subjects: International Trade ; Urban, Rural, and Regional Economics ; Analysis of Collective Decision-making

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