DP3542 Regional Specialization and Transport Costs

Author(s): Takatoshi Tabuchi, Jacques-François Thisse
Publication Date: September 2002
Keyword(s): agglomeration, interregional mobility, intersectoral mobility, transport costs, urban costs
JEL(s): F12, F16, J60, L13, R12
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=3542

We consider an economic geography model in which all firms and workers are mobile, but the agglomeration of firms and workers within a region generates urban costs. We show that industries with high transport costs tend to be more agglomerated than industries with low transport costs. This is to be contrasted to the result obtained in the one-industry case in which agglomeration arises for low transport costs. We also show that firms supplying non-tradable consumer services are more agglomerated than firms belonging to light industries. In this case, the equilibrium involves an urban hierarchy: for each good, a larger array of varieties is produced within the same city.