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Structural Change and Growth in a NEG model

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  • F. Cerina

    ()

  • F. Mureddu

    ()

Abstract

This paper presents a New Economic Geography model of structural change, agglomeration and growth. By assuming the same non-homothetic preference structure as Murata (2008), we obtain similar results in that a progressive reduction of trade costs allows the economy to pass from a pre-industrialized to an industrialized stage and then, within the latter, from a dispersed to an urbanized regime. However, the introduction of capital accumulation and the dynamic setting of our model open the door to a richer set of implications. First, an additional stage is introduced as, for some intermediate values of trade costs, a multiple equilibria regime emerges with the symmetric and the core-periphery equilibria stable at the same time. Second, the introduction of non-homotheticity introduces a new channel through which growth is affected by trade costs and agglomeration. In particular, integration is always growth-enhancing while agglomeration is growth-detrimental.

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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 201118.

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Date of creation: 2011
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Handle: RePEc:cns:cnscwp:201118

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Keywords: structural change; non-homothetic preferences; agglomeration; growth;

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  1. F. Cerina & F. Mureddu, 2008. "Agglomeration and Growth with Endogenous Expenditure Shares," Working Paper CRENoS 200820, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  2. Foellmi, Reto & Zweim├╝ller, Josef, 2008. "Structural change, Engel's consumption cycles and Kaldor's facts of economic growth," Journal of Monetary Economics, Elsevier, vol. 55(7), pages 1317-1328, October.
  3. Douglas Gollin & Stephen Parente & Richard Rogerson, 2002. "The Role of Agriculture in Development," Department of Economics Working Papers 2002-09, Department of Economics, Williams College.
  4. 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.
  5. Baldwin, Richard E. & Martin, Philippe & Ottaviano, Gianmarco I.P., 1998. "Global Income Divergence, Trade and Industrialisation: The Geography of Growth Take-Offs," Working Paper Series 496, Research Institute of Industrial Economics.
  6. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, 06.
  7. Murata, Yasusada, 2008. "Engel's law, Petty's law, and agglomeration," Journal of Development Economics, Elsevier, vol. 87(1), pages 161-177, August.
  8. Baldwin, Richard & Martin, Philippe, 2003. "Agglomeration and Regional Growth," CEPR Discussion Papers 3960, C.E.P.R. Discussion Papers.
  9. repec:fth:stanho:e-92-3 is not listed on IDEAS
  10. F. Mureddu & F. Cerina, 2009. "Is Agglomeration really good for Growth? Global Efficiency, Interregional Equity and Uneven Growth," Working Paper CRENoS 200913, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
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