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ON PITCHFORKS AND TOMAHAWKS*
Author(s) -
Pflüger Michael,
Südekum Jens
Publication year - 2011
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/j.1467-9787.2010.00695.x
Subject(s) - constant elasticity of substitution , economies of agglomeration , economics , elasticity of substitution , mathematical economics , constant (computer programming) , hysteresis , elasticity (physics) , property (philosophy) , econometrics , mathematics , economic geography , microeconomics , production (economics) , computer science , physics , thermodynamics , programming language , quantum mechanics , philosophy , epistemology
The core‐periphery model of the new economic geography has two “dramatic” implications: catastrophic agglomeration and locational hysteresis around the symmetry breaking level of trade freeness. In this note, we study a generalized version of this model with constant elasticity of substitution (CES) instead of Cobb‐Douglas upper tier preferences. The possibility of a continuous and easily reversible transition from symmetry to agglomeration now arises. One of the most prominent results of the new economic geography literature—the catastrophic consequences of small parameter changes—therefore, hinges crucially on specific functional forms for consumer preferences.