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Structural Change, Urban Congestion, and the End of Growth

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  • Volker Grossmann

Abstract

This paper develops a two-sector R&D-based growth model with congestion effects from increasing urban population density. We show that endogenous technological progress causes structural change if there are positive productivity spillovers from the modern to the traditional sector and Engel’s law holds. In turn, urban congestion effects cause a productivity slowdown in the modern sector. Eventually, economic growth may cease in the long-run. We also show that land dilution from a higher workforce may give rise to negative scale effects on GDP per capita. Finally, we investigate how the optimal land allocation depends on the strength of urban congestion effects.

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Bibliographic Info

Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3626.

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Date of creation: 2011
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Handle: RePEc:ces:ceswps:_3626

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Keywords: congestion; endogenous growth; Engel’s law; structural change; urbanization;

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  1. Andreas Irmen & Johanna Kuehnel, 2008. "Productive Government Expenditure and Economic Growth," CESifo Working Paper Series 2314, CESifo Group Munich.
  2. Holger Strulik, 2005. "Too Much of a Good Thing? The Quantitative Economics of R&D–driven Growth Revisited," Discussion Papers 05-26, University of Copenhagen. Department of Economics.
  3. Ngai, Liwa Rachel & Pissarides, Christopher, 2004. "Structural Change in a Multi-Sector Model of Growth," CEPR Discussion Papers 4763, C.E.P.R. Discussion Papers.
  4. Kongsamut, Piyabha & Rebelo, Sérgio & Xie, Danyang, 1997. "Beyond Balanced Growth," CEPR Discussion Papers 1693, C.E.P.R. Discussion Papers.
  5. Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
  6. Kiminori Matsuyama, 1991. "Agricultural Productivity, Comparative Advantage and Economic Growth," NBER Working Papers 3606, National Bureau of Economic Research, Inc.
  7. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," NBER Working Papers 12475, National Bureau of Economic Research, Inc.
  8. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, number 9780521898010, Fall.
  9. Henderson, Vernon, 2003. " The Urbanization Process and Economic Growth: The So-What Question," Journal of Economic Growth, Springer, vol. 8(1), pages 47-71, March.
  10. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  11. Timo Boppart, 2010. "Engel's Law and Growth with Directed Technical Change," DEGIT Conference Papers c015_017, DEGIT, Dynamics, Economic Growth, and International Trade.
  12. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, number 9780521725200, Fall.
  13. Holger Strulik, 2001. "The Role of Human Capital and Population Growth in R&D-Based Models of Economic Growth," Quantitative Macroeconomics Working Papers 20109, Hamburg University, Department of Economics.
  14. Sala-I-Martin, X. & Barro, R.J., 1991. "Public Finance in Models of Economic Growth," Papers 640, Yale - Economic Growth Center.
  15. repec:fth:stanho:e-92-3 is not listed on IDEAS
  16. Dalgaard, Carl-Johan & Kreiner, Claus Thustrup, 2001. " Is Declining Productivity Inevitable?," Journal of Economic Growth, Springer, vol. 6(3), pages 187-203, September.
  17. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, vol. 21(1), pages 183-204, January.
  18. Grossmann, Volker, 2009. "Entrepreneurial innovation and economic growth," Journal of Macroeconomics, Elsevier, vol. 31(4), pages 602-613, December.
  19. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, vol. 18(6), pages 1173-1187, November.
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