Agglomeration and Endogenous Capital

Richard Baldwin

No 6459, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: The new' economic geography focuses on the footloose-labor and the vertically-linked-industries models. Both are complex since they feature demand-linked and cost-linked agglomeration forces. I present a simpler model where agglomeration stems from demand-linked forces arising from endogenous capital with forward-looking agents. The model's simplicity permits many analytic results (rare in economic geography). Trade-cost levels that trigger catastrophic agglomeration are identified analytically, liberalization between almost equal-sized nations is shown to entail near-catastrophic' agglomeration, and Krugman's informal stability test is shown to be equivalent to formal tests in a fully specified dynamic model.

Date: 1998-03
Note: ITI
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Citations: View citations in EconPapers (10)

Published as European Economic Review, Vol.43, no.2 (1999): 253-280.

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Related works:
Journal Article: Agglomeration and endogenous capital (1999)
Working Paper: Agglomeration and Endogenous Capital (1998)
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