This paper develops a model that shows how a country can endogenously become differentiated into a private-sector dominated ‘core’ region and a public-sector dominated ‘periphery’. A large public sector is closely associated with peripheral economies, although it is unclear to what extent it is a cause of peripherality rather than a symptom. The paper takes a minimum public sector size, dependent on each region's population, to present a public sector increasing in volume relative to falling population. This modelling activity is an attempt to quantify empirical and quantitative observations on the size of regional public sectors in terms of the new economic geography, and demonstrates that under various conditions a relatively large public sector can be beneficial for a peripheral region.
|Number of pages||14|
|Journal||Spatial Economic Analysis|
|Publication status||Published - 31 Dec 2012|
- New Economic Geography
- public sector
- transport costs
- increasing returns