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Agglomeration and regional growth

In: Handbook of Regional and Urban Economics

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Author Info
Baldwin, Richard E.
Martin, Philippe

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Abstract

We review the theoretical links between growth and agglomeration. Growth, in the form of innovation, can be at the origin of catastrophic spatial agglomeration in a cumulative process a la Myrdal. One of the surprising features of the Krugman [Journal of Political Economy 99 (1991) 483-499] model, was that the introduction of partial labor mobility in a standard "new trade model" with trade costs could lead to catastrophic agglomeration. The growth analog to this result is that the introduction of endogenous growth in the same type of "new trade model" can lead to the same result. A difference with the labour mobility version is that the results are easier to derive from the analytical point of view in the endogenous growth version. We show that the relation between growth and agglomeration depends crucially on capital (human or physical) mobility between regions. The absence of capital mobility is at the heart of the possibility of spatial agglomeration with catastrophe. In addition, growth alters the process of location even without catastrophe. In particular, and contrary to the fundamentally static models of the New Economic Geography, spatial concentration of economic activities may be consistent with a process of delocation of firms towards poor regions. Finally, the presence of localized technology spillovers implies that spatial agglomeration is conducive to growth.

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This chapter was published in: J. V. Henderson & J. F. Thisse (ed.) Handbook of Regional and Urban Economics, , chapter 60, pages 2671-2711, 2004.

This item is provided by Elsevier in its series Handbook of Regional and Urban Economics with number 4-60.

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This chapter was published in the following book, which is listed on IDEAS:
J. V. Henderson & J. F. Thisse (ed.), 2004. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 4, number 4. [Downloadable!] (restricted)
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R1 - Urban, Rural, and Regional Economics - - General Regional Economics

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    Other versions:
  4. Wolfgang Keller, 2000. "Geographic Localization of International Technology Diffusion," NBER Working Papers 7509, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  6. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February. [Downloadable!] (restricted)
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  7. Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-68, November.
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  8. Baldwin, Richard & Forslid, Rikard, 1996. "Trade Liberalization and Endogenous Growth: A q-Theory Approach," CEPR Discussion Papers 1397, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  9. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November. [Downloadable!] (restricted)
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  12. Duncan Black & Vernon Henderson, 1999. "A Theory of Urban Growth," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 252-284, April. [Downloadable!] (restricted)
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  14. Gianmarco Ottaviano & Takatoshi Tabuchi & Jacques-FranÁois Thisse, 2002. "Agglomeration and Trade Revisited," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 43(2), pages 409-436, May. [Downloadable!] (restricted)
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  15. Bottazzi, Laura, 2001. "Globalization and local proximity in innovation: A dynamic process," European Economic Review, Elsevier, vol. 45(4-6), pages 731-741, May. [Downloadable!] (restricted)
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  18. Dieter M. Urban, 2007. "Neoclassical Growth, Manufacturing Agglomeration, and Terms of Trade," Review of International Economics, Blackwell Publishing, vol. 15(5), pages 1014-1035, November. [Downloadable!] (restricted)
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  23. Martin, Philippe & I.P. Ottaviano, Gianmarco, 1999. "Growing locations: Industry location in a model of endogenous growth," European Economic Review, Elsevier, vol. 43(2), pages 281-302, February. [Downloadable!] (restricted)
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  24. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers 3135, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  27. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Rosina Moreno & Raffaele Paci & Stefano Usai, 2005. "Geographical and sectoral clusters of innovation in Europe," The Annals of Regional Science, Springer, vol. 39(4), pages 715-739, December. [Downloadable!] (restricted)
    Other versions:
  2. Sonia Deidda & Raffaele Paci & Stefano Usai, 2003. "Spatial Externalities and Local Economic Growth," ERSA conference papers ersa03p81, European Regional Science Association. [Downloadable!]
    Other versions:
  3. Egle Tafenau, 2008. "Can Welfare Be Improved By Relocating Firms? The Case Of The Constructed Capital Model," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 64, Faculty of Economics and Business Administration, University of Tartu (Estonia). [Downloadable!]
  4. Danilo Igliori, 2008. "Deforestation, Growth and Agglomeration Effects: Evidence from Agriculture in the Brazilian Amazon," Environmental Economy and Policy Research Working Papers 29.2008, University of Cambridge, Department of Land Economics, revised 2008. [Downloadable!]
    Other versions:
  5. Okada, Aya & Siddharthan, N.S., 2007. "Industrial Clusters in India: Evidence from Automobile Clusters in Chennai and the National Capital Region," IDE Discussion Papers 103, Institute of Developing Economies, Japan External Trade Organization(JETRO). [Downloadable!]
  6. Joeri Gorter & Albert Van der Horst, 2005. "New Economic Geography, Empirics, and Regional Policy," ERSA conference papers ersa05p236, European Regional Science Association. [Downloadable!]
    Other versions:
  7. Robert Stehrer & Neil Foster, 2008. "Sectoral Productivity, Density and Agglomeration in the Wider Europe," Working Papers 47, The Vienna Institute for International Economic Studies, wiiw. [Downloadable!]
  8. Alvaro Angeriz & John McCombie & Mark Roberts, 2008. "Returns to Scale for EU Regional Manufacturing," Working Papers 20, Queen Mary, University of London, School of Business and Management, Centre for Globalisation Research. [Downloadable!]
  9. Robert E. Lucas, Jr., 2007. "Trade and the Diffusion of the Industrial Revolution," NBER Working Papers 13286, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Harry P. Bowen & Haris Munandar & Jean-Marie Viaene, 2006. "Evidence and Implications of Zipf’s Law for Integrated Economies," CESifo Working Paper Series CESifo Working Paper No. , CESifo GmbH. [Downloadable!]
    Other versions:
  11. Fabio Cerina & Francesco Pigliaru, 2005. "Agglomeration and Growth in the NEG: a critical assessment," Working Paper CRENoS 200510, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia. [Downloadable!]
  12. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  13. Thomas Gries & Tobias Heinrich, 2004. "Regional Growth and Development without Scale Effects – a Simple Model of Endogenous Formation of Regions," DEGIT Conference Papers c009_022, DEGIT, Dynamics, Economic Growth, and International Trade. [Downloadable!]
  14. Brock, William & Xepapadeas, Anastasios, 2008. "General Pattern Formation in Recursive Dynamical Systems Models in Economics," MPRA Paper 12305, University Library of Munich, Germany. [Downloadable!]
  15. Rosina Moreno & Raffaele Paci & Stefano Usai, 2004. "Innovation and production clusters in Europe," ERSA conference papers ersa04p587, European Regional Science Association. [Downloadable!]
  16. GUILLAIN, Rachel & DALL'ERBA, Sandy & LE GALLO, Julie, 2007. "Politiques de développement et croissance régionale en Europe : le rôle des rendements croissants et des dépendances spatiales," LEG - Document de travail - Economie 2007-02, LEG, Laboratoire d'Economie et de Gestion, CNRS UMR 5118, Université de Bourgogne. [Downloadable!]
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