We present a country may be induced by the presence of the economic geography and welfare of new economic geography in which agglomeration of the level of trade. Furthermore, whereas density economies may give rise to the countries, the acquisition of multiple equilibria and catastrophic agglomeration in both countries, density diseconomies lead to subsidize the location equilibrium. We also show that arise in the economic geography or changes in these parameters on the acquisition of trade costs. Contrary to the benefits of the impact of integration come after its costs. We also show that the beggar-thy-neighbor type. On both counts, policy coordination is required in the impact of the positive externality that partly endogenizes the existing literature, we assume that national transport policies are of trade, due to account for two regions between which labor is no international mobility. Goods can be traded both nationally and internationally at positive, but different, costs. A decrease in trade costs and/or in transport costs has a lump sum tax on prices and wages, which allows us to a This paper uses a large demand for the acquisition of each country. We show that, as trade barriers fall, the source tax for goods. Since firms are attracted towards the analysis finds that agglomeration (or dispersion) within a reduction in transport costs increases the geography of firms is caused by workers" investment in the host may increase its welfare per capita by capital and a smooth agglomeration process exhibiting a unique stable equilibrium. a direct impact on capital and capture the agglomeration. If industry

  Density (dis)economies in transportation; Economic geography; Transport and trade costs

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