Agglomeration triggered by the effect of the number of regions: A model in NEG with a quadratic subutility

TL;DR

This paper extends a multi-regional economic model to analyze how the number of regions influences agglomeration, revealing stability patterns depending on the number of regions and transport costs.

Contribution

It introduces a multi-regional extension of Ottaviano-Tabuchi-Thisse's model and analyzes stability based on the number of regions and transport costs.

Findings

Homogeneous solution stable for 2 and 3 regions at high transport costs.

Homogeneous solution unstable for multiples of four regions regardless of transport costs.

Stability depends critically on the number of regions in the model.

Abstract

We extend the mathematical model proposed by Ottaviano-Tabuchi-Thisse (2002) to a multi-regional case and investigate the stability of the homogeneous stationary solution of the model in a one-dimensional periodic space. When the number of regions is two and three, the homogeneous stationary solution is stable under sufficiently high transport cost. On the other hand, when the number of regions is a multiple of four, the homogeneous stationary solution is unstable under any values of the transport cost.