Working Paper: NBER ID: w4616
Authors: Paul Krugman
Abstract: Recent models in economic geography suggest that there may be very large numbers of equilibrium spatial structures. Simulations suggest, however, that the structures that emerge are surprisingly orderly, and often seem approximately to follow simple rules about the spacing of urban sites. This paper offers an explanation in terms of the process by which a spatial economy diverges away from an even distribution of activity across the landscape. It shows that a small divergence of activity away from spatial uniformity, even if it is highly irregular, can be regarded as the sum of a number of simple periodic fluctuations at different spatial 'wavelengths'; these fluctuations grow at different rates. There is a particular 'preferred wavelength' that grows fastest; provided that the initial distribution of activity across space is flat enough, this preferred wavelength eventually dominates the spatial pattern and becomes the typical distance between cities. The approach suggests that surprisingly simple principles of self-organization may lie beneath the surface of models that appear at first to yield hopelessly complex possibilities.
Keywords: spatial economics; agglomeration; urban economics; economic geography
JEL Codes: R12; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| small divergence from an even distribution of manufacturing (D39) | emergence of ordered spatial structures (C69) |
| initial irregularities in spatial distribution (R12) | periodic fluctuations of varying wavelengths (E32) |
| one particular wavelength grows fastest (O40) | dominates the spatial pattern of agglomeration (R12) |
| preferred wavelength (H21) | transportation costs (L91) |
| preferred wavelength (H21) | scale economies (F12) |
| preferred wavelength (H21) | share of manufacturing in the economy (L60) |
| successful manufacturing concentrations (L69) | shadow effect on nearby rivals (C92) |
| spacing of manufacturing concentrations (L69) | preferred wavelength (H21) |