The Annals of Regional Science

, Volume 50, Issue 1, pp 71–108 | Cite as

A third sector in the core-periphery model: non-tradable goods

  • Vasco Leite
  • Sofia B. S. D. Castro
  • João Correia-da-Silva
Original Paper

Abstract

We extend an analytically solvable core-periphery model by introducing a monopolistically competitive sector of non-tradable goods that is mobile across regions. We find that when the elasticity of substitution among non-tradable goods is very low, there is agglomeration of all the production (of both tradable and non-tradable goods). When the elasticity of substitution among non-tradable goods is sufficiently high (“no black-hole” condition), then there is symmetric dispersion of all the production, if trade costs are high; or full agglomeration of the production of tradable goods with partial agglomeration of the production of non-tradable goods, if trade costs are low.

JEL Classification

F12 R12 

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Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  • Vasco Leite
    • 1
    • 2
  • Sofia B. S. D. Castro
    • 3
  • João Correia-da-Silva
    • 4
  1. 1.Comissão de Coordenação e Desenvolvimento Regional do NortePortoPortugal
  2. 2.Instituto Politécnico do Cávado e AveBarcelosPortugal
  3. 3.CMUP and Faculdade de EconomiaUniversidade do PortoPortoPortugal
  4. 4.CEF.UP and Faculdade de EconomiaUniversidade do PortoPortoPortugal

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