How important are agglomeration economies for the location of foreign manufacturing plants? We investigate this question by combining innovations from previous studies and by taking advantage of a quasi-experimental setting: the political and economic transition in Romania. The recent, sudden...

This chapter surveys recent developments in agglomeration theory within a unifying framework. We highlight how locational fundamentals, agglomeration economies, the spatial sorting of heterogeneous agents, and selection effects affect the size, productivity, composition, and inequality of...