This paper tackles thè issue of thè optimality of agglomeration in a two-region economy \vith skilled/mobile and nnskilled/immobile workers. The market leads to thè optimal outcome when transport costs are high or low. However, for intermediate values, it yields agglomeration whereas dispersion is socially desirable. We show that competitive lobbying on factor mobility by thè two groups of workers sustains thè second best optimum.
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