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Agglomeration and growth: the effects of commuting costs

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Author Info
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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File URL: http://www.bancaditalia.it/pubblicazioni/econo/temidi/td08/td688_08/entd688_08/en_tema_688.pdf
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Paper provided by Bank of Italy, Economic Research Department 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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Web page: http://www.bancaditalia.it
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Related research
Keywords: Congestion; Endogenous Growth; Migration;

Find related papers by JEL classification:
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development

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This page was last updated on 2009-12-4.

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