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Agglomeration in a global economy: a survey

  • Gianmarco I. P. Ottaviano
  • Diego Puga

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.

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File URL: http://eprints.lse.ac.uk/20324/
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Paper provided by London School of Economics and Political Science, LSE Library in its series LSE Research Online Documents on Economics with number 20324.

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Length: 33 pages
Date of creation: Aug 1997
Date of revision:
Handle: RePEc:ehl:lserod:20324
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