Abstract
We introduce heterogeneous preferences for location in 2-region core-periphery models, thereby generating an additional dispersive force: the home-sweet-home effect. Different forms of heterogeneity in preferences for location induce different long-run spatial distributions of economic activity, depending on the short-run equilibrium model and the distribution of preferences for location that are considered. Our analysis highlights the importance of the convexity/concavity properties of utility from consumption and utility from location, as functions of the spatial distribution of economic activity.
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Castro, S.B.S.D., Correia-da-Silva, J. & Gaspar, J.M. Economic geography meets Hotelling: the home-sweet-home effect. Econ Theory 73, 183–209 (2022). https://doi.org/10.1007/s00199-020-01331-8
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DOI: https://doi.org/10.1007/s00199-020-01331-8