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Marshallian theory of regional agglomeration

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  • Michael Beenstock
  • Daniel Felsenstein

Abstract

Most models of regional agglomeration are based on the new economic geography (NEG) model in which returns to scale are pecuniary. We investigate the implications for regional agglomeration of a ‘Marshallian’ model in which returns to scale derive from technological externalities. Workers are assumed to have heterogeneous ‘home region’ preferences. The model is designed to explain how ‘second nature’ determines regional wage inequality and the regional distribution of economic activity. We show that agglomeration is not a necessary outcome of Marshallian externalities. However, if centrifugal or positive externalities are sufficiently strong relative to their centripetal or negative counterparts, the model generates multiple agglomerating equilibria. These equilibria multiply if, in addition, there are scale economies in amenities. A dynamic version of the model is developed in which external economies and inter‐regional labour mobility grow over time. Regional wage inequality overshoots its long run equilibrium and, there is more agglomeration in the long run. Resumen La mayoría de modelos de aglomeración regional están basados en el modelo de la nueva geografía económica (NEG, por sus siglas en inglés) en el que los retornos de escala son monetarios. Investigamos las implicaciones para la aglomeración regional de un modelo “marshaliano” en el que los retornos de escala provienen de externalidades tecnológicas. Se asume que los trabajadores tienen preferencias heterogéneas en cuanto a su región local. El modelo está diseñado para explicar como lo “instintivo” determina la desigualdad salarial regional y la distribución regional de la actividad económica. Mostramos que la aglomeración no es necesariamente un resultado de externalidades marshalianas. Sin embargo, si las externalidades centrífugas o positivas son lo suficientemente poderosas en relación a sus contrapartidas centrípetas o negativas, el modelo genera múltiples equilibrios de aglomeración. Estos equilibrios se multiplican si además hay economía de escala en servicios. Se desarrolla una versión del modelo en el que las economías externas y la movilidad de mano de obra interregional crecen con el tiempo. La desigualdad de salarios regional excede su equilibrio a largo plazo y a la larga hay más aglomeración.

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  • Michael Beenstock & Daniel Felsenstein, 2010. "Marshallian theory of regional agglomeration," Papers in Regional Science, Wiley Blackwell, vol. 89(1), pages 155-172, March.
    • Handle: RePEc:bla:presci:v:89:y:2010:i:1:p:155-172
    DOI: 10.1111/j.1435-5957.2009.00253.x
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