Increasing returns, monopolistic competition, and agglomeration economies in consumption and production

This paper models agglomeration economies endogenously, showing explicitly the origins of the external effects involved. The emphasis is on how variety within the urban service sector is determined, within a market structure of monopolistic competition, and on how this diversity generates agglomerat...

Full description

Saved in:
Bibliographic Details
Published in:Regional science and urban economics 1988-02, Vol.18 (1), p.125-153
Main Author: Rivera-Batiz, Francisco L.
Format: Article
Language:English
Subjects:
Consumption
Economic models
Economic theory
Mathematical analysis
Monopolistic competition
Product differentiation
Production
Studies
Urban
Citations: Items that this one cites
Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:This paper models agglomeration economies endogenously, showing explicitly the origins of the external effects involved. The emphasis is on how variety within the urban service sector is determined, within a market structure of monopolistic competition, and on how this diversity generates agglomeration economies. Through the consumption side, the urban agglomeration of households is shown to raise the number of consumer services locally available, shifting upwards household utility in the presence of tastes toward product diversity. Through the production side, an agglomeration of industrial producers raises the derived demand for producer or business services, increasing the scope for specialization and division of labor among these. This augments, in turn, the productivity of the industrial base, giving rise to external economies of scale.
ISSN:0166-0462
1879-2308
DOI:10.1016/0166-0462(88)90008-7