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Heterogeneous firms, urban costs and agglomeration

Yiming Zhou

International Journal of Economic Theory, 2020, vol. 16, issue 3, 329-348

Abstract: This paper explores how the interaction between firm heterogeneity, urban costs and transport costs determines spatial configuration across regions within a simple general equilibrium model. We shed light on how firm heterogeneity affects the centrifugal and centripetal forces and reshapes the spatial configuration of an urban space economy. We show analytically that an increase in firm heterogeneity increases the range in which a symmetric equilibrium is stable. In addition, full agglomeration is shown to be always sustainable, which complements existing results in literature.

Date: 2020
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