Transitional Dynamics in a Model of Economic Geography

We build upon previous work by Dixit and Stiglitz (1977) and Krugman (1990) to introduce a model of economic geography in which agglomeration of production, a zero-profit competitive equilibrium, and an endogenously-driven industrial revolution arise out of the profit-maximizing choices made by firms and the utility-maxmizing choices made by workers/consumers. We further describe results that imply -- contrary to conclusions of much analytical work on business cycles -- that "sticky" wages actually appear to stabilize, rather than destabilize output and employment in a Krugman-type model of economic geography