In this paper, we construct a simple overlapping generations model with two regions and interregional migration to examine problems related to dynamic agglomeration economies. The existence of agglomeration economies is well established （Krugman 1991, Fujita et al. 1999）. Assuming Marshallian externalities, productivity in one region increases with population in that area. Therefore, an income difference between a core and a peripheral area diverges when people move from the periphery to the core area. We assume that households receive utility from the number of children and from consumption. Generally speaking, urbanization increases the costs of having children. Agglomeration has two diverse effects on household utility. On the one hand, it increases productivity, wage income, and consumption, which are positive effects of agglomeration. On the other hand, urbanization negatively affects the number of children and labor supply （because people use more time to raise children in cities）. If these negative effects exceed the positive ones, then people do not agglomerate in the city. Two symmetric cities exist in equilibrium. If positive effects predominate, then people concentrate in metropolitan areas. Our main conclusions are as follows. First, the types of equilibrium become the determinants of important variables in the steady state. Capital stock, population, number of cities, and GDP is higher in cases of symmetric equilibrium. Second, the types of equilibrium do not affect the level of the capital-labor ratio and per capita GDP in the steady state. Third, along the transitional dynamics, the level of households’ utility is higher in the symmetric equilibrium.
JEL Classification:O18, O40, R11, J13