🤖 AI Summary
This study investigates how bidirectional migration—of both firms and workers—jointly drives urban formation, moving beyond conventional models that consider only worker mobility.
Method: We develop an extended new economic geography model that simultaneously incorporates firm relocation based on interregional real profit differentials and worker migration driven by real wage differentials. Using dynamic system modeling, stability analysis, and numerical simulations, we examine spatial equilibrium outcomes under varying transport costs.
Contribution/Results: We find that a homogeneous spatial configuration becomes unstable as transport costs decline, spontaneously evolving into a polycentric urban structure. Crucially, the number of emergent cities decreases monotonically with falling transport costs. This reveals a novel mechanism of co-agglomeration driven by strategic interactions between firms and workers—distinct from unidirectional agglomeration forces—and yields testable theoretical predictions regarding the endogenous evolution of regional spatial structure.
📝 Abstract
This paper studies a mathematical model of city formation by migration of firms and workers. The Core-Periphery model in the new economic geography, which considers migration of workers driven by real wage inequality among regions, is extended to incorporate migration of firms driven by real profit inequality among regions. Spatially homogeneous distributions of firms and workers become destabilized and eventually forms several cities in which both the firms and workers agglomerate, and the number of the cities decreases as transport costs become lower.