Abstract
This paper constructs a new economic geography (NEG) model incorporating a natural disaster risk and examines the interrelationship between industrial agglomeration and vulnerability of a spatial economy. We shows that the location pattern emerging as the market equilibrium is characterized by over-agglomeration and is more vulnerable than that of social optimum. By analyzing the regional spillover effects of disaster mitigation investment for inter-regional and intra-regional transportation, this paper declares that disaster mitigation investment improves the utilitarian social welfare, but it does not always increase the survival rate of firms at the time of disaster.
