In standard models of New Economic Geography the overall regional price index in the centre is lower than in the periphery, because trade in manufacturing imposes transportation costs whereas trade in agriculture is assumed to be costless. Since real world observations suggest higher overall...

This paper picks up the seminal model of Venables (1996) and provides a quantifying concept for the sectoral coherence in vertical-linkage models of the New Economic Geography. Based upon an alternative approach to solve the model and to determine critical trade cost values, this paper focuses...