This paper is concerced with the role of externalities and nonconvexities in agglomeration (concentration) of urban population and production. The paper examines whether, indeed, as often asserted, the external aspect of scale economies (diseconomies) deters (enhances) agglomeration.

In this paper we argue that the impact of external scale economies and diseconomies on city size is not nearly as clear-cut as it is tacitly believed in urban economics. Similarly, that city-size distortions are not caused by externalities alone. Noncovexity, which prevents establishing the...