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Growing locations: Industry location in a model of endogenous growth

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  • Martin, Philippe
  • I.P. Ottaviano, Gianmarco

Abstract

This paper constructs a model of endogenous growth and endogenous industry location where the two interact. We show that with global spillovers in R&D, a high growth rate and a high level of transaction costs are associated with relocation of the newly created firms to the South (the location with a low initial human capital). With local spillovers in R&D, this activity will be agglomerated in the North and the rate of innovation will increase with the concentration of firms in the North. This in turn implies that a decrease of transaction costs through, for example, trade integration, will increase the growth rate because it leads to a higher industrial concentration of firms where the R&D is located. We show that industrial concentration improves welfare only for low enough transaction costs and high enough spillovers.

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Bibliographic Info

Article provided by Elsevier in its journal European Economic Review.

Volume (Year): 43 (1999)
Issue (Month): 2 (February)
Pages: 281-302

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Handle: RePEc:eee:eecrev:v:43:y:1999:i:2:p:281-302

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Web page: http://www.elsevier.com/locate/eer

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References

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  1. Luis A. Rivera-Batiz & Paul M. Romer, 1990. "Economic Integration and Endogenous Growth," NBER Working Papers 3528, National Bureau of Economic Research, Inc.
  2. Walz, Uwe, 1996. "Transport costs, intermediate goods, and localized growth," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 671-695, December.
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  4. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
  5. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  6. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August.
  7. Krugman, Paul & Venables, Anthony J., 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
  8. repec:fth:iniesr:430 is not listed on IDEAS
  9. J. Vernon Henderson & Ari Kuncoro & Matthew Turner, 1992. "Industrial Development in Cities," NBER Working Papers 4178, National Bureau of Economic Research, Inc.
  10. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  11. Baldwin, Richard, 1990. "Measurable Dynamic Gains from Trade," Working Paper Series 270, Research Institute of Industrial Economics.
  12. Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  13. Helpman, Elhanan, 1984. "A Simple Theory of International Trade with Multinational Corporations," Journal of Political Economy, University of Chicago Press, vol. 92(3), pages 451-71, June.
  14. Philippe Martin & Gianmarco Ottaviano, 1996. "Growth and Agglomeration," Working Papers 1996-14, CEPII research center.
    • 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.
  15. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
  16. Antonio Ciccone & Robert E. Hall, 1993. "Productivity and the Density of Economic Activity," NBER Working Papers 4313, National Bureau of Economic Research, Inc.
  17. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  18. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  19. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
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