policymakers demonstrate

Regional Disparities and Efficient Transport Policies 343
various congestion and market-crowding effects put a brake on the agglomeration
process, and thus Krugman’s prediction is reversed. The difference
in results is easy to understand. Commuting and housing costs rise when
consumers join the larger region/city, which strengthens the dispersion force.
Simultaneously, lowering transport costs facilitates interregional trade. By
combining these two forces, we see why dispersion arises. In other words,
land use appears to be a major dispersion force in the making of the spaceeconomy.
6 By neglecting the fact that the agglomeration of activities typically
materializes in the form of cities where competition for land acts as a strong
dispersion force, the core–periphery model remains in the tradition of trade theory.
Therefore, conclusions drawn from this model are, at best, applicable only
to very large areas. 7
The econometric analysis undertaken by Crozet (2004), together with the
observations made in Section 8.2, suggests that the low mobility of European
workers makes the emergence of a Krugman-like core–periphery structure
within the EU very unlikely. Therefore, moving beyond the Krugman model in
search of alternative explanations appears to be warranted in order to understand
the emergence of large industrial regions in economies characterized by
a low spatial mobility of labour – such as the EU. A second shortcoming of the
core-periphery model is that it ignores the importance of intermediate goods.
Yet the demand for consumer goods does not account for a very large fraction of
firms’ sales, often being overshadowed by the demand for intermediate goods. 8
8.3.4 Input–Output Linkages and the Bell-Shaped Curve of Spatial
Development
The agglomeration of economic activities also arises in contexts in which
labour mobility is very low, as in most European countries. This underscores the
need for alternative explanations of industrial agglomeration. One strong contender
is the presence of input–output linkages between firms: the output of one
firm can be an input for another, and vice versa. In this case, the entry of a new
firm in a region not only increases the intensity of competition between similar
firms; it also increases the market of upstream firm-suppliers and decreases the
costs of downstream firm-customers. This is the starting point of Krugman and
Venables (1995).
Their idea is beautifully simple and suggestive: the agglomeration of the final
sector in a particular region occurs because of the concentration of the intermediate
industry in the same region, and conversely. Indeed, when firms belonging
to the final sector are concentrated in a single region, the local demand for
intermediate inputs is very high, making this region very attractive to firms producing
these intermediate goods. Conversely, because intermediate goods are
made available at lower prices in the core region, firms producing final goods