Endogenous agglomeration in a many-region world

Abstract

We study a general family of economic geography models that features endogenous agglomeration. In many-region settings, the spatial scale---"global" or "local"---of the dispersion force(s) in a model plays a key role in determining the resulting endogenous spatial patterns and comparative statics. A global dispersion force accrues from competition between different locations and leads to the formation of multiple economic clusters (or cities). A local dispersion force is caused by crowding effects within each location and induces the flattening of each city. By distinguishing local and global dispersion forces, we can define three prototypical classes, namely, models that have only global, only local, and both local and global dispersion forces. The three model classes engender qualitatively different spatial patterns. Multiple cities are formed only when a global dispersion force is at work; otherwise, only a unimodal distribution can be formed. A city can have its spatial extent only when a local dispersion force is at work. A wide variety of extant models are reduced into the three prototypical classes. Our framework adds consistent interpretations to the empirical literature and also provides general \Red{insights into} treatment effects in structural economic geography models.Comment: Main text: 53 pages, 18 figure