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...

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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
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description 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.
doi_str_mv 10.1016/0166-0462(88)90008-7
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1879-2308
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source International Bibliography of the Social Sciences (IBSS); Backfile Package - Economics, Econometrics and Finance (Legacy) [YET]
subjects Consumption
Economic models
Economic theory
Mathematical analysis
Monopolistic competition
Product differentiation
Production
Studies
Urban
title Increasing returns, monopolistic competition, and agglomeration economies in consumption and production
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