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How social interactions matter when distance dies?

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Document pages: 33 pages

Abstract: We consider an economic geography model with two inter-regional proximitystructures, one due to trade linkages and the other due to social interactions.We investigate how the network structure of social interactions, or the socialproximity structure, affects the timing of endogenous agglomeration and thespatial distribution of workers across regions. Endogenous agglomerationemerges when inter-regional trade and or social interactions incur hightransportation costs, and the uniform dispersion occurs when these costs becomenegligibly small (i.e., when distance dies). In many-region geography, thenetwork structure of social proximity emerges as the determinant of thegeographical distribution of workers when trade becomes freer. If socialproximity is governed by geographical distance (as in ground transportation), amono-centric concentration emerges. If geographically distant pairs of regionsare ``socially close (due to, e.g., passenger transportation modes withstrong distance economy such as regional airlines), then geographicallymulti-centric spatial distribution can be sustainable.

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