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Is Agglomeration really good for Growth? Global Efficiency, Interregional Equity and Uneven Growth

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  • F. Mureddu

    ()

  • F. Cerina

    ()

Abstract

According to NEG literature (Baldwin et al. (2004)), spatial concentration of industrial activities increases growth at the regional and aggregate level without generating regional growth differentials. This view is not supported by the data. We extend the canonical model with an additional sector producing non-tradable goods which benefits from localized knowledge spillovers coming from the R&D performing industrial sector. This view, motivated by the evidence, generates both an anti-growth and a pro-growth effect of agglomeration for both the deindustrializing and the industrializing regions and leads to two novel results - 1) when agglomeration takes place, growth is lower in the periphery; 2) agglomeration may have a negative effect on the growth rate of real income, both at the regional and at the aggregate level. Our conclusions have relevant policy implications - contrary to the standard view, current EU and US regional policies favouring industrial dispersion might be welfare-improving both at the regional and the aggregate level and may reduce regional income disparities.

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Bibliographic Info

Paper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200913.

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Date of creation: 2009
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Handle: RePEc:cns:cnscwp:200913

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Keywords: interregional equity; regional real growth; aggregate real growth; agglomeration; non- tradables; localized knowledge spillovers;

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  1. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," 2006 Meeting Papers 207, Society for Economic Dynamics.
  2. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December.
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  3. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
  4. Fabio Cerina & Francesco Mureddu, 2012. "Agglomeration And Growth With Endogenous Expenditure Shares," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 324-360, 05.
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  6. Kuznets, Simon, 1973. "Modern Economic Growth: Findings and Reflections," American Economic Review, American Economic Association, vol. 63(3), pages 247-58, June.
  7. Nuria Quella, 2009. "Knowledge Spillovers and TFP Growth Rates," Department of Economics Working Papers 09-03, Stony Brook University, Department of Economics.
  8. Murata, Yasusada, 2008. "Engel's law, Petty's law, and agglomeration," Journal of Development Economics, Elsevier, vol. 87(1), pages 161-177, August.
  9. Giannetti, Mariassunta, 2002. "The effects of integration on regional disparities: Convergence, divergence or both?," European Economic Review, Elsevier, vol. 46(3), pages 539-567, March.
  10. Jungsoo Park, 2004. "International and Intersectoral R&D Spillovers in the OECD and East Asian Economies," Economic Inquiry, Western Economic Association International, vol. 42(4), pages 739-757, October.
  11. Francisco J. Buera & Joseph P. Kaboski, 2009. "Can Traditional Theories of Structural Change Fit The Data?," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 469-477, 04-05.
  12. R. Paci & F. Pigliaru, 2001. "Technological Diffusion, Spatial Spillovers And Regional Convergence In Europe," Working Paper CRENoS 200101, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  13. Yamamoto, Kazuhiro, 2003. "Agglomeration and growth with innovation in the intermediate goods sector," Regional Science and Urban Economics, Elsevier, vol. 33(3), pages 335-360, May.
  14. Flora Bellone & Marie-Antoinette Maupertuis, 2003. "Economic Integration and Regional Income Inequalities: Competing Dynamics of Regional Wages and Innovative Capabilities," Review of International Economics, Wiley Blackwell, vol. 11(3), pages 512-526, 08.
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Cited by:
  1. Kümpel, Arndt, 2011. "Устойчивое региональное развитие, инновации и государствeнный потенциал
    [Sustainable regional development, innovation and state capaci
    ," MPRA Paper 33967, University Library of Munich, Germany, revised 08 Oct 2011.
  2. Vasco Leite & Sofia B.S.D. Castro & João Correia-da-Silva, 2009. "A third sector in the core-periphery model: non-tradable goods," FEP Working Papers 352, Universidade do Porto, Faculdade de Economia do Porto.
  3. F. Cerina & F. Mureddu, 2011. "Structural Change and Growth in a NEG model," Working Paper CRENoS 201118, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  4. Kümpel, Arndt, 2011. "Sustainable regional development, innovation and state capacity," MPRA Paper 33966, University Library of Munich, Germany, revised 08 Oct 2011.

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