We address the fundamental question arising in economic geography: why do economic activities agglomerate in a small number of places? The main reasons for the formation of economic clusters involving firms and/or households are analysed: (i) externalities under perfect competition; (ii)...

Paul Krugman has clarified the microeconomic underpinnings of both spatial economic agglomerations and regional imbalances at national and international levels. He has achieved this with a series of remarkably original papers and books that succeed in combining imperfect competition, increasing...

The purpose of this paper is two-fold. First, we present a model of agglomeration and trade that displays the main features of the recent economic geography literature, while allowing for the derivation of analytical results by means of simple algebra. Second, we show how this framework can be...