Over-simplification and tractability in quasi-linear neg models

Sylvain Barde (1, 2) , John Pierson (2)

1 OFCE - Observatoire français des conjonctures économiques (Sciences Po)
2 University of Kent [Canterbury]

An inconsistency is found in the demand side of the NEG models developed in Pflüger (2004) that follows from the absence of a non-negativity constraint on the consumption of agricultural goods. This seriously weakens the results of the original paper and those of ensuing contributions in Pflüger and Südekum (2008a,b). A solution to this problem is developed which imposes severe restrictions on the relative size of two of the core model parameters, the implications of which are examined.

Keywords: Agglomeration; new economic geography; quasi-linear utility

Domains: Economics and Finance

Sylvain Barde, John Pierson. Over-simplification and tractability in quasi-linear neg models. 2009. ⟨hal-03461777⟩