Agglomeration,Trade and Selection

Gianmarco Ottaviano

No 9046, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies how firm heterogeneity in terms of productivity affects the balance between agglomeration and dispersion forces in the presence of pecuniary externalities through a selection model of monopolistic competition with endogenous markups. It shows that firm heterogeneity matters. However, whether it shifts the balance from agglomeration to dispersion or the other way round depends on its specific features along the two defining dimensions of diversity: `richness' and `evenness'. Accordingly, the role of firm heterogeneity in selection models of agglomeration can not be fully understood without paying due attention to various moments of the underlying firm productivity distribution.

Keywords: Agglomeration; Economic geography; Heterogeneity; Selection; Trade (search for similar items in EconPapers)
JEL-codes: F12 R11 R12 (search for similar items in EconPapers)
Date: 2012-07
New Economics Papers: this item is included in nep-geo, nep-int and nep-ure
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Citations: View citations in EconPapers (23)

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Journal Article: Agglomeration, trade and selection (2012)
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