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Matsuyama, Kiminori
Takahashi, Takaaki
Year of Publication: 
Series/Report no.: 
Discussion Paper No. 1086
We present a two-region economy model, in which inefficienct concentration may occur. Individuals in this economy, even though they prefer evenly distributed across the two regions, concentrate into one region in their pursuit of better life. We characterize the conditions for such self-defeating concentration. What is crucial is the coordination failure between the entry decision of service firms and the migration decision of individuals, generated by the incompleteness of markets, or the lack of opportunity to signal demand and supply for potential services. The argument does not rely on price distortions, congestion externalities, or myopia in migration decisions.
Document Type: 
Working Paper

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