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Spatial Development

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Author Info

  • Klaus Desmet

    (Universidad Carlos III de Madrid)

  • Esteban Rossi-Hansberg

    (Princeton University)

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 Fondazione Eni Enrico Mattei in its series Working Papers with number 2010.26.

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Date of creation: Mar 2010
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Handle: RePEc:fem:femwpa:2010.26

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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. 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.
  3. Brock, William & Xepapadeas, Anastasios, 2008. "Pattern Formation, Spatial Externalities and Regulation in Coupled Economic-Ecological Systems," MPRA Paper 9105, University Library of Munich, Germany.
  4. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
  5. Raouf Boucekkine & Carmen Camacho & Benteng Zou, 2006. "Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model," DEGIT Conference Papers c011_039, DEGIT, Dynamics, Economic Growth, and International Trade.
  6. Carlino, Gerald A. & Chatterjee, Satyajit & Hunt, Robert M., 2007. "Urban density and the rate of invention," Journal of Urban Economics, Elsevier, vol. 61(3), pages 389-419, May.
  7. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  8. 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.
  9. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  10. Morris A. Davis & Jonathan Heathcote, 2004. "The price and quantity of residential land in the United States," Finance and Economics Discussion Series 2004-37, Board of Governors of the Federal Reserve System (U.S.).
  11. Baldwin, Richard & Martin, Philippe, 2003. "Agglomeration and Regional Growth," CEPR Discussion Papers 3960, C.E.P.R. Discussion Papers.
  12. Alan C. Stockman & Linda L. Tesar, 1991. "Tastes and technology in a two-country model of the business cycle: explaining international co-movements," Working Paper 9019, Federal Reserve Bank of Cleveland.
  13. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
  14. Klaus Desmet & Esteban Rossi-Hansberg, 2007. "Spatial Growth and Industry Age," NBER Working Papers 13302, National Bureau of Economic Research, Inc.
  15. 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.
  16. 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.
  17. 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.
  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. 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.
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Citations

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Cited by:
  1. Yasusada Murata & Ryo Nakajima & Ryosuke Okamoto & Ryuichi Tamura, 2011. "Localized knowledge spillovers and patent citations: A distance-based approach," KIER Working Papers 763, Kyoto University, Institute of Economic Research.
  2. Ejaz Ghani & Arti Grover Goswami & William R. Kerr, 2012. "Is India’s Manufacturing Sector Moving Away From Cities?," Harvard Business School Working Papers 12-090, Harvard Business School.
  3. Kei-Mu Yi & Jing Zhang, 2010. "Structural Change in an Open Economy," Working Papers 595, Research Seminar in International Economics, University of Michigan.
  4. Ejaz Ghani & William R. Kerr & Stephen D. O'Connell, 2011. "Spatial Determinants of Entrepreneurship in India," NBER Working Papers 17514, National Bureau of Economic Research, Inc.
  5. Jan Eeckhout & Roberto Pinheiro & Kurt Schmidheiny, 2010. "Spatial Sorting: Why New York, Los Angeles and DetroitAttract the Greatest Minds as well as the Unskilled," CESifo Working Paper Series 3274, CESifo Group Munich.
  6. Ejaz Ghani & William R. Kerr & Stephen D. O'Connell, 2011. "Local Industrial Structures and Female Entrepreneurship in India," NBER Working Papers 17596, National Bureau of Economic Research, Inc.

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