Incorporating regional asymmetry and negative feedbacks (congestion) in a model of economic geography and international trade shows that complete specialization of production at one location is unlikely. We identify an agglomerating force: the home market effect, and two spreading forces, competition for demand from immobile sectors of production and congestion. We demonstrate that negative feedbacks can explain the economic viability of small industrial regions observed in the real world. Simulations clarify the basic structure of the model.

Journal of Regional Science
Erasmus School of Economics

Brakman, S., Garretsen, H., Gigengack, R., van Marrewijk, C., & Wagenvoort, R. (1996). Negative feedbacks and industrial location. Journal of Regional Science, 631–651. doi:10.1111/j.1467-9787.1996.tb01122.x