Intermediate goods and the spatial integration of land uses

A model with two commodities, one final and one intermediate, is set out in a spatial context. Each commodity requires land in production and must be transported at positive costs between sites. Two solutions are possible: an integrated one in which the final and intermediate goods share the same site and a segregated one in which final and intermediate goods occupy distinct areas. The condition for determining which pattern will be efficient is obtained and the result plus a numerical example are related to observations reported on the history of urban areas. The phenomenon of two distinct equilibria is found in a model which permits another factor to be substituted for land in production.