This study analyzes the possibility of increased regional economic inequality in Bulgaria following the collapse of Soviet‐style Communism, which promoted spatial egalitarianism in development policies. Spatial equilibrium (neoclassical) and spatial concentration (cumulative causation) models of regional development in market economies suggest different trends. International investments reported in Business Eastern Europe from 1989 through 1992 are analyzed to test the hypothesis that regional inequalities are increasing as the cumulative causation school suggested they would. Analysis of date, location, type of transaction, and sector variables reveals Sofia's development as a service center and sectoral changes that may have regional implications if the pace of foreign investment quickens. The evidence fails, however, to refute the neoclassical spatial equilibrium model and also fails to dispel the possibility that residual influences of Communist policies are discouraging foreign investment and preventing market‐driven spatial adjustments.

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The legal city and the urbanized area fail to depict accurately the physical area of urban development and therefore prevent an accurate calculation of population densities. When underbounding occurs, densities tend to be unrealistically high and with overbounding they are low. Delimitations made by air photo interpretation demonstrate that the physical city, measured on a 21/2 acre scale of generalization, provides a more accurate basis for calculating population densities of urban areas than either the legal city or urbanized area because the bounding problems are eliminated.

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