  This paper studies a mathematical model of city formation by migration of
firms and workers. The Core-Periphery model in the new economic geography,
which considers migration of workers driven by real wage inequality among
regions, is extended to incorporate migration of firms driven by real profit
inequality among regions. Spatially homogeneous distributions of firms and
workers become destabilized and eventually forms several cities in which both
the firms and workers agglomerate, and the number of the cities decreases as
transport costs become lower.
