Economics of Agglomeration
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Abstract
We address the fundamental question arising in geographical economics: why do economic activities agglomerate in a small number of places? The main reasons for the formation of economic clusters involving firms and/or households are analyzed: (i) externalities under perfect competition; (ii) increasing returns under monopolistic competition; and (iii) spatial competition under strategic interaction. We review what has been accomplished in these three domains and identify a few general principles governing the organization of economic space. A few alternative, new approaches are also proposed.J. Japan. Int. Econ.,December 1996,10(4), pp. 339–378. Kyoto University and University of Pennsylvania; and CORE, Université Catholique de Louvain and CERAS–ENPC (URA 2036, CNRS).