Trade openness and city size with taste heterogeneity [Ouverture commerciale et tailles des agglomérations avec hétérogénéité des gouts]

This paper incorporates taste heterogeneity, as a dispersion force, into Fujita et al.'s New Economic Geography model. By doing so, agglomeration of both firms and workers is the result of market and non-market interactions. We analyze the outcomes of the original model vis-à-vis the outcomes of its extension. In particular, we assess the impact of international trade openness on cities' size. Two main general predictions arise from such a departure. First, the breakpoint with taste heterogeneity is higher than the breakpoint associated without it. Second, for low levels of trade openness urban agglomeration is attenuated with taste heterogeneity. Finally, based upon particular values of the parameters of the model, market outcomes converge to the optimal social welfare outcomes as taste heterogeneity increases. © 2010 Regional Studies Association