Essays on the New Economic Geography
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This dissertation comprises three independent essays which are related to the new economic geography (NEG) model. Each chapter is written with its own introduction and references. The first essay focuses on the welfare analysis of the core-periphery model (CP model hereafter) which is the backbone of the NEG models. The second essay illustrates the optimal growth formation in an urban system comprised of a center and peripheral subcenters. The third essay shows the effects of agglomeration tendencies in the CP model by allowing firms can choose to become multi-plant firms. The first of the three essays explores the social optimum in the CP model. I found that there is no production inefficiency but there is an allocation inefficiency in the CP model with only one region. Then, in the CP model with two regions, I found that too much agglomeration occurs when the immobile labor is the major group in the economy. On the other hand, it is possible to have either too much or too little agglomeration when the mobile labor is the major group in the economy. The second essay focuses on the optimal urban system formation. I established a modified NEG model with a center and endogenous subcenters surrounding the center. I found that the optimal urban growth formation entails subcenters of fixed size, emerging one by one, and the size of the center could increase or decrease depending on the trade cost and the unit commuting cost. I also explore the role of the center and subcenters. Establishing new subcenters creates more space to release congestion in the center and other subcenters, whereas the urban system should have a large size center when flourishing trade can bring a lot of benefit. In the third essay, I follow the setup of the CP model but allow firms to choose to become multi-plant firms. I focus on two types of the fixed cost structure of the multi-plant firm: region-oriented and headquarters-oriented which assume that the allocation of the fixed cost between regions is exogenous and endogenous respectively. I confirm that transport costs affect firms' location choice and strategy choice. Firms have more incentive to become multi-plant firms when the transport cost and the degree of multi-plant firm economies of scale is high. For region-oriented multi-plant firms, the formation of market equilibria is the same as in the CP model but the dispersion force becomes stronger. For headquarters-oriented multi-plant firms, we obtain stable asymmetric market equilibria which do not arise in the CP model, and the entry of multi-plant firms could introduce both centripetal and centrifugal forces.