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Spatial Development

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  • Desmet, Klaus
  • Rossi-Hansberg, Esteban

Abstract

We present a theory of spatial development. A continuum of locations in a geographic area choose each period how much to innovate (if at all) in manufacturing and services. Locations can trade subject to transport costs and technology diffuses spatially across locations. The result is an endogenous growth theory that can shed light on the link between the evolution of economic activity over time and space. We apply the model to study the evolution of the U.S. economy in the last few decades and find that the model can generate the reduction in the employment share in manufacturing, the increase in service productivity in the second part of the 1990s, the increase in land rents in the same period, as well as several other spatial and temporal patterns.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7479.

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Date of creation: Sep 2009
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Handle: RePEc:cpr:ceprdp:7479

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Related research

Keywords: Dynamic spatial models; Growth; Innovation; Land rent evolution; Structural transformation; Technology diffusion; Trade;

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References

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  1. Danny Quah, 2002. "Spatial Agglomeration Dynamics," American Economic Review, American Economic Association, vol. 92(2), pages 247-252, May.
  2. Klaus Desmet & Esteban Rossi-Hansberg, 2007. "Spatial Growth and Industry Age," NBER Working Papers 13302, National Bureau of Economic Research, Inc.
  3. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  4. 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.
  5. Baldwin, Richard E. & Martin, Philippe, 2004. "Agglomeration and regional growth," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 60, pages 2671-2711 Elsevier.
  6. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sector Level," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 11(4), pages 820-835, October.
  7. Alan C. Stockman & Linda L. Tesar, 1990. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," NBER Working Papers 3566, National Bureau of Economic Research, Inc.
  8. Raouf Boucekkine & C. Camacho & B. Zou, 2007. "Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model," Working Papers 2007_27, Business School - Economics, University of Glasgow.
  9. Herrendorf, Berthold & Valentinyi, Akos, 2007. "Measuring Factor Income Shares at the Sector Level - A Primer," CEPR Discussion Papers 6271, C.E.P.R. Discussion Papers.
  10. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  11. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
  12. Jonathan Heathcote & Morris Davis, 2004. "The Price and Quantity of Residential Land in the United States," 2004 Meeting Papers 32, Society for Economic Dynamics.
  13. Diego Puga, 1996. "The rise and fall of regional inequalities," LSE Research Online Documents on Economics 20643, London School of Economics and Political Science, LSE Library.
  14. Brock, William & Xepapadeas, Anastasios, 2008. "Pattern Formation, Spatial Externalities and Regulation in Coupled Economic-Ecological Systems," MPRA Paper 9105, University Library of Munich, Germany.
  15. Francisco J. Buera & Joseph P. Kaboski, 2012. "The Rise of the Service Economy," American Economic Review, American Economic Association, vol. 102(6), pages 2540-69, October.
  16. Gerald Carlino & Satyajit Chatterjee & Robert Hunt, 2006. "Urban density and the rate of invention," Working Papers 06-14, Federal Reserve Bank of Philadelphia.
  17. Brock, William & Xepapadeas, Anastasios, 2008. "Diffusion-induced instability and pattern formation in infinite horizon recursive optimal control," Journal of Economic Dynamics and Control, Elsevier, vol. 32(9), pages 2745-2787, September.
  18. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  19. Danny Quah, 2002. "Spatial Agglomeration Dynamics," CEP Discussion Papers dp0521, Centre for Economic Performance, LSE.
  20. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-70, August.
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