Costs of land, capital mobile and the regional distribution of manufacturers

A variety of factors can affect manufacturerspsila agglomeration, such as trade costs and consumer preferences, production technology, market structure, etc. Among those factors, land constitutes the special basis of economic activity, and its liquidity is also the smallest of productive factors. Under the condition of increasing returns to scale, monopolistic competition, in this paper we developed a model of classical space economics. We put the land into theory framework of spatial distribution of the manufactures. Our study found that land is an important source to economic decentralization, and prevent the occurrence of concentration of manufacturers. The conclusionspsila enlightenment to China now is: It is low efficiency for local government to attract external capital through the way of land price competition.