One of the most notable features of literature about "new economic geography" is a close association between theoretical and empirical work. In contrast to earlier research, theoretical studies are often much more strongly focused on real-world phenomena. At the same time, empirical work is...

1. I develop a two-city model to explain a new stylized fact: high-income cities specialize in income-elastic sectors. The model has heterogeneous income elasticities and mobile agents, and either heterogeneous fundamental productivities or heterogeneous amenities generate the specialization...