In a two sectors, two regions economy I show that the higher increasing returns to
scale of an industry, the easier it will concentrate in response to natural advantage.
To this end, one sector is assumed to be perfectly competitive and the other is monopolistically
competitive, with a region’s firms producing at a lower marginal cost
than the others in the monopolistic sector (or equivalently producing varieties more
intensely demanded by consumers). If capital is mobile between regions in the long
run, I analytically characterize the process of industrial location of the imperfectly
competitive sector in the region with the comparative advantage
