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Evaluation of Regional Economic Policy in the New Economic Geography
In this paper, the authors analyze the impact of a simple regional economic policy in the context of the core periphery model of the New Economic Geography. More specifically, the authors look at the welfare effects of a decrease in transport cost that is financed by a lump-sum tax on all inhabitants of the country. Results are based on simulation.
Link
http://www.ersa.org/ersaconfs/ersa04/PDF/119.pdf