Lucas and Rossi-Hansberg (L&RH) (2002, Econometrica, 70: 1445�1476) and Fujita and Ogawa (F&O) (1982, Regional Science and Urban Economics, 12: 161�196, 1989, Environment and Planning A, 21: 363�374) develop urban models in which economic activity self-organizes due to spillovers in production. However, F&O (1982, Regional Science and Urban Economics, 12: 161�196, 1989, Env…