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Growth and Agglomeration

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Author Info
Martin, Philippe
Ottaviano, Gianmarco Ireo Paolo

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Abstract

This paper presents a model in which growth and geographic agglomeration of economic activities are mutually self reinforcing processes. Industrial agglomeration in one location spurs growth because it reduces the cost of innovation in that location through a pecuniary externality due to transaction costs. Growth fosters agglomeration because as the sector at the origin of innovation expands, new firms tend to locate close to this sector. The model can be interpreted as illustrating one mechanism behind the emergence of cities seen as centres for production and innovation, and is consistent with the episodes of simultaneous increases in growth rates and spatial agglomeration.

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Publisher Info
Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 1529.

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Date of creation: Nov 1996
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Handle: RePEc:cpr:ceprdp:1529

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Related research
Keywords: Agglomeration; Cities; Endogenous Growth; Technological Progress;

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Find related papers by JEL classification:
O31 - Economic Development, Technological Change, and Growth - - Technological Change - - - Innovation and Invention: Processes and Incentives
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Williamson, Jeffrey G., 1988. "Migration and urbanization," Handbook of Development Economics, in: Hollis Chenery† & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 11, pages 425-465 Elsevier. [Downloadable!] (restricted)
  2. Martin, Philippe & Ottaviano, Gianmarco Ireo Paolo, 1996. "Growing Locations: Industry Location in a Model of Endogenous Growth," CEPR Discussion Papers 1523, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  3. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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