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Agglomeration and growth: the effects of commuting costs

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  • Antonio Accetturo

    ()
    (Bank of Italy, Regional Economic Research Staff, Milan Branch)

Abstract

We present a model of industrial location and endogenous growth with congestion costs. According to the interplay between knowledge spillovers and commuting costs, we are able to obtain both a Krugman-type and a bell-shaped agglomeration outcome. In the first case, the economy experiences a permanent income inequality in the steady state and income divergence in the transitional dynamics. In the second case, we observe an enlargement of the industrial core of the economy with a strong catching up by the periphery. Welfare analysis shows that congestion create (in the bell-shaped agglomeration case) a negative welfare effect on peripheral unskilled workers and renders the agglomerated equilibrium Pareto inferior to dispersion.

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Bibliographic Info

Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 688.

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Date of creation: Sep 2008
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Handle: RePEc:bdi:wptemi:td_688_08

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Postal: Via Nazionale, 91 - 00184 Roma
Web page: http://www.bancaditalia.it
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Keywords: Congestion; Endogenous Growth; Migration;

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Cited by:
  1. Fujishima, Shota, 2013. "Growth, agglomeration, and urban congestion," Journal of Economic Dynamics and Control, Elsevier, vol. 37(6), pages 1168-1181.
  2. Colin Davis & Ken-ichi Hashimoto, 2014. "Industry Concentration, Knowledge Diffusion, and Economic Growth Without Scale Effects," Discussion Papers 1408, Graduate School of Economics, Kobe University.

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