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JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org.. The Econometric Society is collaborating with JSTOR to digitize, preserve and extend access to Econometrica.Humans exhibit a fundamental propensity to interact for social, cultural, technological, and other reasons. In this paper we seek to determine when the propensity to interact, expressed in the form of a spatial externality, becomes strong enough to induce agglomeration. We design an abstract world where the only possible reason for agglomeration is the spatial externality. In this world the uniform population distribution is a steady-state. Then to ask under what circumstances does a spatial externality induce agglomeration is to ask under what circumstances does it induce an instability of the steady-state: anything other than a uniform steady-state implies some agglomeration.

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This is the second in a series of three interrelated papers which aim to combine evolutionary migration models with stochastic utility theory. The first paper dealt with migratory dynamics. Here the details are given of a choice model, established by McFadden, which can be used in conjunction with migratory dynamics thus providing an explicit link between the macroproperties of the population system and human behaviour. First, the structure of transition probabilities is derived under a two-level decision to migrate. An argument is then given about the empirical form of these probabilities, and the discussion closes with a method which can be used for their maximum likelihood estimation.