Agglomeration and Trade Revisited
The purpose of this paper is twofold. First, we present an alternative model of agglomeration and trade that displays the main features of the recent economic geography literature while allowing for the derivation of analytical results by means of simple algebra. Second, we show how this framework can be used to permit (i) a welfare analysis of the agglomeration process, (ii) a full-fledged forward looking analysis of the role of history and expectations in the emergence of economic clusters, and (iii) a simple analysis of the impact of urban costs on the spatial distribution of economic activities.
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