Jinhwan Oh, PhD, candidate, Economics Department, Cornell University, NY
Based on a spatial dimension to agglomeration, this paper investigates economic concentration and congestion. Departing from the Murphy, Shleifer, and Vishny model where two equilibria of poverty trap and full industrialization are discussed, this paper suggests a possibility of partial industrialization. Unlike the original model in which fixed cost F and productivity α are assumed to be constant, this paper argues that both F and α are non-monotonic functions of n (number of entering monopolist firms), and that an economy stays in a partial industrialization when congestion effects and external diseconomies are dominant. However, situations are dynamic in the sense that, as long as an economy overcomes congestion problems, it may reach the status of full industrialization.