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Urban industrial relocation: the theory of edge cities

  • F Medda
  • P Nijkamp
  • P Rietveld

Urban economists have recently focused on a 'newly recognised' phenomenon: edge cities. In the first part of this paper we review the model of Krugman and Fujita and the model of Henderson and Mitra regarding this urban phenomenon. The introduction of our model represents a possible third way of explaining the edge city process. Our objective is to examine the conditions under which we can observe a relocation of firms from an urban location to a new extra-urban location. Our methodological framework is based on the model of monopolistic competition, which examines the economic relationships among firms at each industrial location and the relationships among distinct firms at different locations. These intrarelationships and interrelationships are examined according to the concept of complementarity. Complementarity in our case combines the notions of (1) firm interaction with cumulative and reinforcing effects, and (2) coordination among firms in local industrial structures. Our interest in this notion stems from the necessity to explain the spatial distribution of firms, particularly the reason why and where firms choose to locate in clusters. In our model we analyse this aspect of location in clusters from the point of view of the elasticity of substitution.

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Article provided by Pion Ltd, London in its journal Environment and Planning B: Planning and Design.

Volume (Year): 26 (1999)
Issue (Month): 5 (September)
Pages: 751-761

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Handle: RePEc:pio:envirb:v:26:y:1999:i:5:p:751-761
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  1. Ethier, Wilfred J, 1982. "National and International Returns to Scale in the Modern Theory of International Trade," American Economic Review, American Economic Association, vol. 72(3), pages 389-405, June.
  2. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  4. Ottaviano, Gianmarco, 1996. "Monopolistic Competition, Trade, and Endogenous Spatial Fluctuations," CEPR Discussion Papers 1327, C.E.P.R. Discussion Papers.
  5. Henderson, Vernon & Mitra, Arindam, 1996. "The new urban landscape: Developers and edge cities," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 613-643, December.
  6. Krugman, Paul, 1993. "On the number and location of cities," European Economic Review, Elsevier, vol. 37(2-3), pages 293-298, April.
  7. Hart, Oliver D, 1985. "Monopolistic Competition in the Spirit of Chamberlin: A General Model," Review of Economic Studies, Wiley Blackwell, vol. 52(4), pages 529-46, October.
  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
  9. Paul Krugman & Anthony J. Venables, 1995. "The Seamless World: A Spatial Model of International Specialization," NBER Working Papers 5220, National Bureau of Economic Research, Inc.
  10. Kiminori Matsuyama, 1995. "Complementarities and Cumulative Processes in Models of Monopolistic Competition," Journal of Economic Literature, American Economic Association, vol. 33(2), pages 701-729, June.
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