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Toshihiro Atsumi
''Agglomeration under money illusion''
( 2017, Vol. 37 No.4 )
The core-periphery model by Krugman (1991) sparked the literature of new economic geography, which studies the mechanism of spatial agglomeration of economic activities. Forslid and Ottaviano (2003) offered an analytically solvable version of the core-periphery model. Based on their results, I comment on further implications of the model besides those covered in their paper and subsequent studies. Specifically, I show that agglomeration still occurs even under complete money illusion, but with two differences: 1) agglomeration becomes less likely, that is, other things being equal, agglomeration occurs less easily, and 2) the break and the sustain points coincide.
Keywords: agglomeration, economic geography, money illusion
JEL: F1 - Trade: General
F2 - International Factor Movements and International Business: General
Manuscript Received : Jan 30 2017 Manuscript Accepted : Dec 29 2017

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