A theoretical framework for Evolutionary Economic Geography: Industrial dynamics and urban growth as a branching process
AbstractWe propose a framework that specifies the process of economic development as an evolutionary branching process of product innovations. Each product innovation provides a growth opportunity for an existing firm or a new firm, and for an existing city or a new city. One can then obtain both firm size and city size distributions as two aggregates resulting from a single evolutionary process. Gains from variety at the firm level (economies of scope) and the urban level (Jacobs externalities) provide the central feedback mechanism in economic development generating strong path dependencies in the spatial concentration of industries and the specialisation of cities. Gains from size are also expected, yet these are ultimately bounded by increasing wages. The contribution of our framework lies in providing a micro-foundation of economic geography in terms of the interplay between industrial dynamics and urban growth. The framework is sufficiently general to investigate systematically a number of stylised facts in economic geography, while at the same time it is sufficiently flexible to be extended such as to become applicable in more specific micro-contexts. A number of extensions related to the concepts of knowledge spillover and lock-in, are also discussed.
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Bibliographic InfoPaper provided by Utrecht University, Section of Economic Geography in its series Papers in Evolutionary Economic Geography (PEEG) with number 0701.
Length: 15 pages
Date of creation: Mar 2007
Date of revision: Mar 2007
evolutionary economic geography; urban growth; firm growth; Zipf; branching; innovation;
Other versions of this item:
- Koen Frenken & Ron A. Boschma, 2007. "A theoretical framework for evolutionary economic geography: industrial dynamics and urban growth as a branching process," Journal of Economic Geography, Oxford University Press, vol. 7(5), pages 635-649, September.
- B25 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Historical; Institutional; Evolutionary; Austrian
- B52 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Institutional; Evolutionary
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
- R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General
- R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-12 (All new papers)
- NEP-EVO-2007-05-12 (Evolutionary Economics)
- NEP-GEO-2007-05-12 (Economic Geography)
- NEP-INO-2007-05-12 (Innovation)
- NEP-TID-2007-05-12 (Technology & Industrial Dynamics)
- NEP-URE-2007-05-12 (Urban & Real Estate Economics)
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