Agglomeration and Welfare with Heterogeneous Preferences
29 Pages Posted: 22 Apr 2009
Date Written: April 22, 2009
This paper constructs a model of endogenous location of entrepreneurs with preference heterogeneity between individuals. Two main results are found. First, agglomeration and partial dispersion can be simultaneously stable but preference heterogeneity reduces the possibility of multiple equilibria. Secondly, measuring individual welfare in terms of equivalent income we show that in the case of agglomeration, the worst-off workers would prefer a dispersed equilibrium.
Suggested Citation: Suggested Citation