In this paper, we develop an economic geography model in which firms sell product varieties with heterogeneous demands. We show that firms that sell products with higher demand choose to establish their plants in larger countries, which provide better access to the most frequently demanded and...

This paper studies how firm heterogeneity in terms of productivity affects the balance between agglomeration and dispersion forces in the presence of pecuniary externalities through a selection model of monopolistic competition with endogenous markups. It shows that firm heterogeneity matters....

We compute aggregate productivity of three categories of regions, classified by the level of urbanization and density of economic activity in the Netherlands, from firm-specific total factor productivity (TFP) measures. TFP measures are estimated by a semi-parametric algorithm, within 2-digit...