Capital Market Frictions and Economic Geography

Konferenzbeitrag

The field of New Economic Geography (NEG) aims at explaining agglomeration based on increasing returns, monopolistic competition and international factor mobility. Deviating from existing approaches, this paper constructs a theoretical model based on capital market frictions. Firms compete monopolistically, but are lead by managers subject to moral hazard. Incentivizing managers is cheaper in regions with higher purchasing power, i.e., in industrialized regions where goods do not need to be imported and the price index is thus low. This simple mechanism leads to a host of predictions; some in line with traditional NEG literature, some contradictory.

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• Language: Englisch

References and Relationships

• Bibliographic citation: Series: Beiträge zur Jahrestagung des Vereins für Socialpolitik 2010: Ökonomie der Familie - Session: Policy Issues of Firm Heterogeneity and Trade ; No. B5-V2

Classification and Topics

• Classification: Wirtschaft ; Models of Trade with Imperfect Competition and Scale Economies; Fragmentation ; International Investment; Long-term Capital Movements ; International Financial Markets
• Subject: New Economic Geography ; Capital market ; Moral hazard

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Kranich, Jan ; Hakenes, Hendrik
• Event: Veröffentlichung
• (who): Verein für Socialpolitik
• (where): Frankfurt a. M.
• (when): 2010

Further information

• Handle: http://hdl.handle.net/10419/37290