DP1344 Economics of Agglomeration
|Author(s):||Masahisa Fujita, Jacques-François Thisse|
|Publication Date:||February 1996|
|Keyword(s):||Agglomeration, City, Externality, Imperfect Competition, Trade|
|JEL(s):||F12, L13, R12|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=1344|
We address the fundamental question arising in economic geography: why do economic activities agglomerate in a small number of places? The main reasons for the formation of economic clusters involving firms and/or households are analysed: (i) externalities under perfect competition; (ii) increasing returns under monopolistic competition; and (iii) spatial competition under strategic interaction. We review what has been accomplished in these three domains and identify a few general principles governing the organization of economic space. Other standard lines of research in location theory are also discussed while several alternative, new approaches are proposed.