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Agglomeration and Specialization Patterns when Firms and Workers are Footloose

Author

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  • Coulibaly, Souleymane

    () (The World Bank)

Abstract

In new economic geography models, geographic concentration cant arise because of workers mobility or vertical linkages between firms. We examine a setup that combines those two approaches in conjunction with local congestion costs. We find that, as trade costs are lowered, the geographic concentration of total activity (agglomeration) follows an inverse u-shaped evolution, while the degree of specialization of regions increases. These results shed light on regional development within a country as integration proceeds: when trade costs are hight, firms evenly spread between the regions to supply local demand at low costs, hence diversified regions; at intermediate trade costs, we have coexistence of a diversified core and a specialized periphery and at low trade costs, each industry clusters in one region to fully exploit returns to scale externalities. US city centers and non-metropolitan areas during the period 1850-1990 depict such specialization and agglomeration patterns. These results show that a country’s effort to miprove accessibility across its porfolio of places can favor a win-win regional allocation of firms based on each location’s competitive advantage.

Suggested Citation

  • Coulibaly, Souleymane, 2008. "Agglomeration and Specialization Patterns when Firms and Workers are Footloose," Journal of Economic Integration, Center for Economic Integration, Sejong University, vol. 23, pages 205-236.
  • Handle: RePEc:ris:integr:0432
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    More about this item

    Keywords

    Agglomeration; Specialization; Congestion Cost; Input-Output linkages;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R15 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Econometric and Input-Output Models; Other Methods

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