Ž . JOURNAL OF URBAN ECONOMICS 41, 337357 1997 ARTICLE NO. UE962002 On the Endogeneous Formation of Secondary Employment Centers in a City 1 Masahisa Fujita,* Jacques-Franc ¸ ois Thisse, ² and Yves Zenou ‡ *Kyoto Institute of Economic Research, Kyoto Uni  ersity, Yoshida-hommachi, Sakyo-ku, Kyoto 606, Japan; ² CERAS, Ecole Nationale des Ponts et Chaussees, F-75343 Paris, France; ², ‡ CORE, Uni  ersite Catholique de Lou ain, 34 Voie du Roman Pays, ´ B-1348 Lou ain-La-Neu  e, Belgium; and ‡ ERMES, Uni  ersite de Paris II-Assas, 12 ´ place du Pantheon, 75231 Paris Cedex 5, France ´ Received March 22, 1995; revised January 12, 1996 A new approach is proposed to explain the formation of secondary employment centers in a monocentric city. Specifically, a large firm considers locating a new plant in a city where none of the existing businesses has a significative share of the labor force, so that its location can be viewed as a secondary employment center. The choice of this location results from the interplay between the process of competition on both the labor and land markets and the technological externalities generated bythe proximityof the citycenter where other firms are located.  1997 Academic Press 1. INTRODUCTION The purpose of this paper is twofold. First, we want to shed some light Ž . on the emergence of SecondaryEmployment Centers SECs hereafter in a city where employment is primarily located at the Central Business Ž . District CBD hereafter . In particular, we wish to analyze the conditions under which spatial labor markets are integrated to various degrees within Ž  an urban area. Despite its empirical relevance see Eberts 2 , Madden       17 , McDonald and Prather 19 , McMillen and Singell 20 , Small and  . Song 24 , the theoretical study of spatial labor markets is still in infancy Ž         exceptions include Kim 16 , Nakagome 21 , Simpson 23 , Stahl 25 , 1 The authors thank Jacques Dreze, Jonathan Eaton, Massimo Motta, and Jan Brueckner ` and two anonymous referees for their comments. Part of this research was done while the first author was Visiting Professor at the Department of Economics of the Universite de ´ Ž . Paris-Assas. Financial help from PIR-VILLE CNRS and from the European Union ‘‘Hu- man Capital and Mobility’’ program is gratefully acknowledged by the second and third authors, respectively. 337 0094-119097 $25.00 Copyright  1997 by Academic Press All rights of reproduction in any form reserved.