General Equilibrium Theories of Spatial Agglomeration
- Marcus BerliantMarcus BerliantDepartment of Economics, Washington University in St. Louis
- and Ping WangPing WangDepartment of Economics, Washington University in St. Louis; National Bureau of Economic Research
General equilibrium theories of spatial agglomeration are closed models of agent location that explain the formation and growth of cities. There are several types of such theories: conventional Arrow-Debreu competitive equilibrium models and monopolistic competition models, as well as game theoretic models including search and matching setups. Three types of spatial agglomeration forces often come into play: trade, production, and knowledge transmission, under which cities are formed in equilibrium as marketplaces, factory towns, and idea laboratories, respectively. Agglomeration dynamics are linked to urban growth in the long run.