Pflüger, Michael; Südekum, Jens - Institute for the Study of Labor (IZA) - 2004
simple, analytically solvable ‘new economic geography’ model with two trade integrating regions. The location pattern … emerging as market equilibrium is “bubbleshaped”, i.e. it features dispersion of firms both at high and low trade costs and … trade costs. Our central finding is that the market equilibrium is characterised by over-agglomeration for high trade costs …