Step-by-Step Migrations

This paper considers a dynamic model of industry location in which there is a tension between two forces. First, there is the agglomerating force of preference of intermediate input variety that tends to keep an industry at its original location. Second, other location factors matter and these tend to pull the industry in the direction of a new location. A crucial aspect of the model is that the location space is continuous. When the equilibrium is unique, the migration rate is socially efficient. *The address of the author is: Department of Economics, University of Minnesota, 1035 Heller Hall, 271 19th Avenue South, Minneapolis, MN 55455, USA. I am grateful for helpful comments from the referees and the editor. The views expressed herein are those of the author and not necessarily those of the Federal Reserve Bank of Minneapolis or the Federal Reserve System.