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Agglomeration in a global Economy: A Survey

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  • G Ottaviano
  • Diego Puga

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. However, agglomeration raises the price of immobile local factors and goods, so far low transport costs firms may spread to regions where those prices are lower.

Suggested Citation

  • G Ottaviano & Diego Puga, 1997. "Agglomeration in a global Economy: A Survey," CEP Discussion Papers dp0356, Centre for Economic Performance, LSE.
    • Handle: RePEc:cep:cepdps:dp0356
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    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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