Agglomeration in purely neoclassical and symmetric economies

Berliant, Marcus and Watanabe, Axel (2025): Agglomeration in purely neoclassical and symmetric economies.

Abstract

This article demonstrates the emergence of agglomeration unaccompanied by conventional drivers such as scale economies, externalities or comparative advantages. We construct a two-region general equilibrium model with four types of households; there are four commodities and the same linear production functions in each region. Households migrate in search of commodities they lack in their endowment. A type sorts disassortatively toward another type who holds such commodities, resulting in intense agglomerations of diverse types. In contrast, a type sorts assortatively away from another type when they compete for endowments that cannot be transported or produced, resulting in moderate agglomerations dominated by selected types. We identify type complementarity and endowment portability as the primary causative factors behind spatial sorting and the resultant equilibrium agglomeration.

• Item Type: MPRA Paper
• Language: English
• Keywords: Agglomeration; general equilibrium; spatial sorting
• Subjects: R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R13 - General Equilibrium and Welfare Economic Analysis of Regional Economies

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