Is Agglomeration really good for Growth? Global Efficiency, Interregional Equity and Uneven Growth
AbstractAccording 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 InfoPaper provided by Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia in its series Working Paper CRENoS with number 200913.
Date of creation: 2009
Date of revision:
aggregate real growth; regional real growth; agglomeration; interregional equity; non- tradables; localized knowledge spillovers;
Other versions of this item:
- Fabio Cerina & Francesco Mureddu, 2010. "Is Agglomeration really Good for Growth? Global Efficiency, Interregional Equity and Uneven Growth," DEGIT Conference Papers c015_022, DEGIT, Dynamics, Economic Growth, and International Trade.
- R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
- O41 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
- O33 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-01-23 (All new papers)
- NEP-FDG-2010-01-23 (Financial Development & Growth)
- NEP-GEO-2010-01-23 (Economic Geography)
- NEP-INT-2010-01-23 (International Trade)
- NEP-URE-2010-01-23 (Urban & Real Estate Economics)
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