This paper reviews the new economic geography literature, which accounts for the uneven distribution of economic activity across space in terms of a combination of love of variety preferences, increasing returns to scale and transport costs. After outlining the canonical core and periphery...

Krugman’s (1980) model of trade predicts that the country with the relatively large number of consumers is the net exporter and hosts a disproportionate share of firms in the increasing returns sector. He terms these results 'home market effects'. This Paper analyzes three additional models...

The home market effect is considered as a distinguishing feature of models of trade with increasing returns to scale in production and imperfect competition. However, some empirical studies found the existence of home market effect even in constant returns to scale industries. In this paper we...

We develop a multi-country Dixit-Stiglitz model to investigate the impacts of: (i) changes in the international distribution of consumers' expenditure; (ii) decreasing tariffs; and (iii) improvements in transportation infrastructure. We show that, in general, decreasing tariff barriers do not...

This Paper studies the positive aspects of destination vs. origin principles of commodity taxation as well as tax harmonization, with an emphasis on the international implications of these measures when firms are mobile. We investigate the tax incidence of these two principles on price levels...

A Melitz-style model of monopolistic competition with heterogeneous firms is integrated into a simple NEG model to show that the standard assumption of identical firms is neither necessary nor innocuous. We show that re-locating to the big region is most attractive for the most productivity...

This paper examines optimal policy towards a home exporting firm which competes on price with a foreign firm. Two policy instruments are compared: an output subsidy and a price subsidy. The paper also considers two games: the conventional ex ante game, in which the government sets the value of...

This paper investigates the interaction of firms' financial structure and their competitive behaviour on oligopolistic product markets. We consider risk-averse entrepreneurs who produce with uncertain production costs. To reduce their exposure to risk they can sell stocks to risk-neutral...

The British electricity supply industry has, with the exception of Nuclear Electric, now been privatized. Bulk supplies of electricity are traded between two dominant generators and many suppliers in an unregulated `pool'. The generators submit a supply schedule of prices for each generating set...