Economics of Agglomeration, Second Edition

Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse Frontmatter More information Economics of Agglomeration, Second Edition Economic activities are not concentrated on the head of a pin, nor are they spread evenly over a featureless plain. On the contrary, they are distributed very unequally across locations, regions, and countries. Even though economic activities are, to some extent, spatially concentrated because of natural fea- tures, economic mechanisms that rely on the trade-off between various forms of increasing returns and different types of mobility costs are more fundamental. This book is a study of the economic reasons for the existence of a large variety of agglomerations arising from the global to the local. This second edition combines a comprehensive analysis of the fundamentals of spatial economics and an in-depth discussion of the most recent theoretical developments in new economic geography and urban economics. It aims to highlight several of the major economic trends observed in modern societies. Masahisa Fujita, a member of the Japan Academy and the president of Research Institute of Economy, Trade and Industry, has been a major contributor to spatial economic theory during his twenty-year tenure at the University of Pennsylvania and more recently at Kyoto University and Konan University. Professor Fujita is the author or co-author of three books: Spatial Development Planning (1978); Urban Economic Theory (Cambridge University Press, 1989), which remains to this day the most authoritative graduate textbook on urban economics; and The Spatial Economy (1999, co-authored with Paul Krugman and A. J. Venables), which defines the field of new economic geography. Jacques-François Thisse, a Fellow of the Econometric Society and of the Regional Science Association International, is professor of economics at the Uni- versite´ catholique de Louvain (Belgium) and the Higher School of Economics (Russia). He has published in numerous journals, including American Economic Review, Econometrica, Journal of Political Economy, International Economic Review, Management Science, Exploration in Economic History,andJournal of Economic Geography. He is the co-author of Discrete Choice Theory of Product Differentiation (1992; co-authored with S. P. Anderson and A. de Palma), Eco- nomic Geography (2008; co-authored with P.-P.Combes and T. Mayer), and Eco- nomic Geography and the Unequal Development of Regions (2012, co-authored with J.-C. Prager). Professors Fujita and Thisse co-authored the first edition of Economics of Agglomeration: Cities, Industrial Location, and Regional Growth (Cambridge University Press, 2002). © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse Frontmatter More information © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse Frontmatter More information Economics of Agglomeration Cities, Industrial Location, and Globalization Second Edition MASAHISA FUJITA Research Institute of Economy, Trade and Industry, Japan JACQUES-FRANÇ OIS THISSE Catholic University of Louvain © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse Frontmatter More information 32 Avenue of the Americas, New York, NY 10013-2473, USA Cambridge University Press is part of the University of Cambridge. It furthers the University’smission by disseminating knowledge in the pursuit of education, learning and research at the highest international levels of excellence. www.cambridge.org Information on this title: www.cambridge.org/9780521171960 c Masahisa Fujita and Jacques-François Thisse 2002, 2013 This publication is in copyright. Subject to statutory exception and to the provisions of relevant collective licensing agreements, no reproduction of any part may take place without the written permission of Cambridge University Press. First published 2002 Second edition 2013 Printed in the United States of America A catalog record for this publication is available from the British Library. Library of Congress Cataloging in Publication data Fujita, Masahisa. Economics of agglomeration : cities, industrial location, and globalization / by Masahisa Fujita, Jacques-François Thisse. pages cm Includes bibliographical references and index. ISBN 978-1-107-00141-1 (hardback) – ISBN 978-0-521-17196-0 (paperback) 1. Space in economics 2. Regional economics. 3. Urban economics. 4. Industrial location. I. Thisse, Jacques François. II. Title. HT388.F84 2013 330.91732–dc23 2012049385 ISBN 978-1-107-00141-1 Hardback ISBN 978-0-521-17196-0 Paperback Cambridge University Press has no responsibility for the persistence or accuracy of URLs for external or third-party Internet Web sites referred to in this publication and does not guarantee that any content on such Web sites is, or will remain, accurate or appropriate. © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse Frontmatter More information Primitive though it may be, every stable society feels the need of providing its members with centers of assembly, or meeting places. Observance of religious rites, maintenance of markets, and political and judicial gatherings necessarily bring about the designation of localities intended for the assembly of those who wish to or who must participate therein. Henri Pirenne, Medieval Cities, 1925 © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse Frontmatter More information © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse Frontmatter More information Contents Acknowledgments page xi Preface to the Second Edition xiii 1 Agglomeration and Economic Theory 1 1.1 Introduction 1 1.2 Do Transport Costs Still Matter? 5 1.3 Cities: Past and Future 6 1.4 Why Do We Observe Economic Agglomerations? 9 1.5 On the Relationships between Space and Economics 17 1.6 Plan of the Book 24 PART I. FUNDAMENTALS OF SPATIAL ECONOMICS 2 The Breakdown of the Price Mechanism in a Spatial Economy 29 2.1 Introduction 29 2.2 The Assignment Problem 32 2.3 The Spatial Impossibility Theorem 34 2.4 Heterogeneous Space and Externalities 47 2.5 How to Model the Space-Economy? 52 2.6 Concluding Remarks 54 Appendix 55 3ThevonThunen¨ Model and Land Rent Formation 59 3.1 Introduction 59 3.2 The Location of Divisible Activities 62 3.3 The Urban Land Rent 78 3.4 Concluding Remarks 97 4 Increasing Returns and Transport Costs: The Fundamental Trade-off of a Spatial Economy 99 4.1 Introduction 99 vii © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse Frontmatter More information viii Contents 4.2 Micro-Foundations of External Increasing Returns 105 4.3 City Size under Scale Economies 114 4.4 Intercity Trade 125 4.5 Competition and the Spatial Organization of Markets 137 4.6 Concluding Remarks 146 5 Cities and the Public Sector 149 5.1 Introduction 149 5.2 The City as a Public Good 153 5.3 The Number and Size of Jurisdictions under Politics 168 5.4 Concluding Remarks 177 Appendix 179 PART II. THE STRUCTURE OF METROPOLITAN AREAS 6 The Spatial Structure of Cities under Communication Externalities 187 6.1 Introduction 187 6.2 Agglomeration and Spatial Externalities 193 6.3 The City as Spatial Interdependence between Firms and Workers 205 6.4 The Monocentric City 211 6.5 The Polycentric City 221 6.6 The Decentralization of Urban Employment 227 6.7 Concluding Remarks 228 Appendix 230 7 The Formation of Urban Centers under Imperfect Competition 235 7.1 Introduction 235 7.2 The Formation of Downtown under Monopolistic Competition 239 7.3 Oligopoly and the Agglomeration of Firms 251 7.4 Consumers’ Search and the Clustering of Retailers 263 7.5 The Formation of Input Centers 269 7.6 Concluding Remarks 277 Appendix 278 PART III. FACTOR MOBILITY AND INDUSTRIAL LOCATION 8 Industrial Agglomeration under Monopolistic Competition 285 8.1 Introduction 285 8.2 The Core-Periphery Model 291 8.3 The Welfare Analysis of the Core-Periphery Model 315 8.4 City-Regions and the Agglomeration of Firms and Consumers 322 © in this web service Cambridge University Press www.cambridge.org Cambridge University Press 978-1-107-00141-1 - Economics of Agglomeration Cities, Industrial Location, and Globalization: Second Edition Masahisa Fujita and Jacques-François Thisse

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