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Regional Growth and Development without Scale Effects – a Simple Model of Endogenous Formation of Regions

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  • Thomas Gries
  • Tobias Heinrich

Abstract

We present a semi-endogenous model of regional growth and development without scale effects. In this model of a small developing region the world growth rate of technical progress is given. Regional growth is driven by technological change induced by imitation. Imitation is determined by positive externalities from international trade. Regional factor endowments consist of immobile land and human capital which is perfectly mobile between regions. In order to study the endogenous formation of regions we introduce a second region and analyze a non symmetric decrease in international transaction costs. We find agglomeration in the region with better access to international markets, while the less favored region will realize a drop in income and technological capability. Two reactions can be identified. 1. For given resource endowments, the technological imitation process determines the final relative technological steady state positions. 2. Migration between the regions endogenously determines the final resource endowments of the regions. When reaching the no migration equilibrium, the relative development position, the population size and density of the region, as well as comparative advantages are endogenously determined.

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Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c009_022.

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Length: 16 pages
Date of creation: Jun 2004
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Handle: RePEc:deg:conpap:c009_022

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Related research

Keywords: semi-endogenous growth; economic development; international trade; agglomeration; regional growth;

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References

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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  2. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March.
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  8. Alwyn Young, 1998. "Growth without Scale Effects," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 41-63, February.
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  15. Alwyn Young, 1991. "Learning by Doing and the Dynamic Effects of International Trade," NBER Working Papers 3577, National Bureau of Economic Research, Inc.
  16. Jones, Charles I, 1995. "R&D-Based Models of Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 103(4), pages 759-84, August.
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  18. Findlay, Ronald, 1984. "Growth and development in trade models," Handbook of International Economics, in: R. W. Jones & P. B. Kenen (ed.), Handbook of International Economics, edition 1, volume 1, chapter 4, pages 185-236 Elsevier.
  19. Young, Alwyn, 1991. "Learning by Doing and the Dynamic Effects of International Trade," The Quarterly Journal of Economics, MIT Press, vol. 106(2), pages 369-405, May.
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