DP4936 A Simple Model of Economic Geography à la Helpman-Tabuchi

Author(s): Yasusada Murata, Jacques-François Thisse
Publication Date: February 2005
Keyword(s): agglomeration, commuting costs, economic geography, transportation costs, urban costs
JEL(s): F12, R12
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=4936

This paper explores the interplay between commodities? transportation costs and workers? commuting costs within a general equilibrium framework à la Dixit-Stiglitz. Workers are mobile and choose a region to work in as well as an intra-urban location in which to live. We show that a more integrated economy need not be more agglomerated. Instead, low transportation costs lead to the dispersion of economic activities. This is because workers are able to alleviate the burden of urban costs by being dispersed, while retaining a good access to all varieties. By contrast, low commuting costs foster the agglomeration of economic activities.