This paper attempts to model directly the folk theorem of spatial economics, according to which increasing returns to scale are essential for understanding the geographical distributions of activity. The model uses the simple structure of most New Economic Geography papers, with two identical...

This paper extends the Puga (1999) model by introducing urban frictions. It assumes that the agglomeration of manufacturing in a city imposes a cost on the inhabitants of the agglomerated region. Furthermore, an implicit function methodology is developed to provide a numerical stability function...