Modelling the geography of economic activities on a continuous space**The comments received by the participants to two seminars given by the author at Milano†Bocconi and Genève University are gratefully acknowledged. Thanks are also due to Guido Pellegrini of Bologna University for some references, to Milena Gasperoni of the Statistical Office of San Marino Republic for providing the data used in Section 4, to Luisella Montopolino and Giovanni Lafratta of “G. d'Annunzio†University of Chieti for producing the map reported in Figure 2, and to the two anonymous referees for many precious references and suggestions that substantially improved the original paper. The partial financial contribution of MURST 60% of Chieti University and of the Italian National Research Council # 99.01511.CT10 is also gratefully acknowledged

In the present article we propose a spatial micro econometric approach for studying the geographical concentration of economic activities. We analyse the incentives to use this approach rather than the traditional one based on regional aggregates. As an example, we present our prototypical theoretic model – to be seen as a continuous space version of Krugman's concentration model – that includes birth, survival and growth components. We present a numerical estimation of the birth model for a set of data referring to the concentration of the manufacturing industries in the San Marino Republic.