Producer services, economic geography, and services tradability

We investigate how the incorporation of producer services linkages affects the outcome of an economic geography model. We specify the production of ma nufactures such that a variety of producer services is needed to transform tradable unfinished goods into final consumption goods. We find that servic e Linkages promote the concentration of economic activity in a single regio n, but whether full concentration is achieved depends on the costs and mode of services trade. Applying the model to a multiregion world shows that in corporating producer services may also give rise to regions that specialize in different economic activities.