ON PITCHFORKS AND TOMAHAWKS* |
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| Authors: | Michael Pflüger Jens Südekum |
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| Institution: | 1. Faculty of Economics, University of Passau, Innstrasse 27, 94032 Passau, Germany. E‐mail: michael.pflueger@uni‐passau.de;2. University of Duisburg‐Essen, Mercator School of Management, Lotharstra?e 65, 47057 Duisburg, Germany. E‐mail: jens.suedekum@uni‐due.de |
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| Abstract: | ABSTRACT The core‐periphery model of the new economic geography has two “dramatic” implications: catastrophic agglomeration and locational hysteresis around the symmetry breaking level of trade freeness. In this note, we study a generalized version of this model with constant elasticity of substitution (CES) instead of Cobb‐Douglas upper tier preferences. The possibility of a continuous and easily reversible transition from symmetry to agglomeration now arises. One of the most prominent results of the new economic geography literature—the catastrophic consequences of small parameter changes—therefore, hinges crucially on specific functional forms for consumer preferences. |
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