Quotation Grafeneder-Weissteiner, Theresa, Kubin, Ingrid, Prettner, Klaus, Prskawetz, Alexia, Wrzaczek, Stefan. 2015. Coping with inefficiencies in a New Economic Geography model: the unintended consequences of policy interventions. Mathematical Social Sciences. 76 146-157.


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Abstract

This article introduces a social planner version of a central microfounded New Economic Geography model for explicitly answering whether the symmetric equilibrium of the decentralized market economy is socially desirable. We find that savings incentives are too weak, resulting in an inefficiently low capital stock and therefore an inadequate number of product varieties. We derive the appropriate subsidy and taxation scheme to remedy these distortions. Interestingly, implementing the associated policies crucially impacts on the stability of the symmetric equilibrium and has the potential to result in unintended agglomeration processes.

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Publication's profile

Status of publication Published
Affiliation WU
Type of publication Journal article
Journal Mathematical Social Sciences
Citation Index SSCI
WU-Journal-Rating new VW-D
Language English
Title Coping with inefficiencies in a New Economic Geography model: the unintended consequences of policy interventions
Volume 76
Year 2015
Page from 146
Page to 157
Reviewed? Y
URL https://www.sciencedirect.com/science/article/pii/S0165489615000505
DOI https://doi.org/10.1016/j.mathsocsci.2015.05.003
Open Access N

Associations

People
Grafeneder-Weissteiner, Theresa (Former researcher)
Kubin, Ingrid (Details)
Prettner, Klaus (Details)
External
Prskawetz, Alexia (Vienna University of Technology, Austria)
Wrzaczek, Stefan (Vienna University of Technology, Austria)
Organization
Department of Economics (Crespo Cuaresma) (Details)
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