Heterogeneous Firms, Urban Costs and Agglomeration

This paper explores how the interaction between firm heterogeneity, urban costs and transport costs determines spatial configuration across regions within a simple general-equilibrium model. We spot light on how firm heterogeneity affects the centrifugal and centripetal forces and reshapes the spatial configuration of a urban space economy. We analytically disclose that an increase in firm heterogeneity increases the range in which a symmetric equilibrium is stable. In addition, full agglomeration is shown to be always sustainable, which complements existing results in literature