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Agglomeration in the Global Economy: A Survey of the 'New Economic Geography'

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  • Ottaviano, Gianmarco Ireo Paolo
  • Puga, Diego

Abstract

This review of recent contributions reveals common conclusions about the effects of integration on location. For high trade costs the need to supply markets locally encourages firms to spread across different regions. Integration weakens the incentives for self-sufficiency and for intermediate values of trade costs pecuniary externalities induce firms and workers to cluster together, turning location into a self-reinforcing process. Agglomeration raises the price of immobile local factors and goods, however, so for low transport costs, firms may spread to regions where those prices are lower.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1699.

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Date of creation: Oct 1997
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Handle: RePEc:cpr:ceprdp:1699

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Keywords: Agglomeration; Economic Geography; Integration; Linkages; Location; Migration;

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