Working Paper: CEPR ID: DP3542
Authors: Takatoshi Tabuchi; Jacques-François Thisse
Abstract: We consider an economic geography model in which all firms and workers are mobile, but the agglomeration of firms and workers within a region generates urban costs. We show that industries with high transport costs tend to be more agglomerated than industries with low transport costs. This is to be contrasted to the result obtained in the one-industry case in which agglomeration arises for low transport costs. We also show that firms supplying non-tradable consumer services are more agglomerated than firms belonging to light industries. In this case, the equilibrium involves an urban hierarchy: for each good, a larger array of varieties is produced within the same city.
Keywords: agglomeration; interregional mobility; intersectoral mobility; transport costs; urban costs
JEL Codes: F12; F16; J60; L13; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| high transport costs (L91) | increased agglomeration of firms (R32) |
| urban costs increase with population density (R23) | increased agglomeration of firms (R32) |
| transport costs and commuting costs interact (R41) | equilibrium outcomes depend on transport and commuting costs (R41) |