Toward a general-equilibrium theory of a core-periphery system of cities

A general-equilibrium spatial model of a core-periphery system of cities which allows for labor heterogeneity was developed to determine the factors that give rise to the core-periphery structure of demographic, economic and income disparity trends. The results show that the equilibrium configuration is characterized by a core producing only high-technology products and a periphery that produces only food products. Search-and-match, transportation cost and city formation cost parameters are mainly responsible for income disparity between the core and periphery regions.