In recent years there has been great interest in economic geography (e.g., Pual Krugman, 1991). A central theoretical result form this literature is that if the population increases at a location, there will be an increase in the va- reity of differentiated goods produced at the location. In these analyses, the number of dif- ferent varieties at a location is they key margin. This paper (which summarizes work in Holmes [1998]) (highlights a second margin That the previous literature has ignored.
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