Modeling Agglomeration and Dispersion in City and Country: Gunnar Myrdal, FranÁois Perroux, and the New Economic Geography

The "new economic geography" is a recent body of literature that seeks to explain how resources and production come to be concentrated spatially for reasons other than the standard "geographic" ones. Unlike alternative explanations of the geographic distribution of industry, the literature is not interdisciplinary. The new economic geography lies well within economics proper: it is an offspring of international trade theory, with models characterized by increasing returns, factor mobility, and transportation costs. The models explain the distribution of industry in terms of the opposition of an agglomerating force, the interaction of transportation costs and increasing returns to scale, with a dispersing force, commonly the interaction of transportation costs and a partially fixed input or output market. Copyright 2001 The American Journal of Economics and Sociology.