A simple model of economic geography ˆ la Helpman-Tabuchi
This paper explores the interplay between commoditiesÕ transportation costs and workersÕ commuting costs within a general equilibrium framework ˆ la Dixit-Stiglitz. Workers are mobile and choose a region where to work as well as an intraurban location to live. We sow that a more integrated economy need not be more agglomerated. Instead, low transportation costs lead to the dispersion of economic activities. This is because workers are able to alleviate the burden of urban costs by being dispersed, while retaining a good access to all varieties. By contrast, low commuting costs foster the agglomeration of economic activities.
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