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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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Keywords: Dynamic Spatial Models; Growth; Innovation; Land Rent Evolution; Structural Transformation; Technology Diffusion; Trade;

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References

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  1. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  2. Danny Quah, 2002. "Spatial Agglomeration Dynamics," CEP Discussion Papers dp0521, Centre for Economic Performance, LSE.
  3. Klaus Desmet & Esteban Rossi-Hansberg, 2007. "Spatial Growth and Industry Age," NBER Working Papers 13302, National Bureau of Economic Research, Inc.
  4. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  5. L. Rachel Ngai & Christopher Pissarides, 2004. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 3550, London School of Economics and Political Science, LSE Library.
  6. Davis, Morris & Heathcote, Jonathan, 2005. "The Price and Quantity of Residential Land in the United States," CEPR Discussion Papers 5333, C.E.P.R. Discussion Papers.
  7. Quah, Danny, 2002. "Spatial Agglomeration Dynamics," CEPR Discussion Papers 3208, C.E.P.R. Discussion Papers.
  8. 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.
  9. 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.
  10. 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.
  11. 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.
  12. BOUCEKKINE, Raouf & CAMACHO, Carmen & ZOU, Benteng, . "Bridging the gap between growth theory and the new economic geography: The spatial Ramsey model," CORE Discussion Papers RP -2090, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  13. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  14. 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.
  15. Stockman, Alan C & Tesar, Linda L, 1995. "Tastes and Technology in a Two-Country Model of the Business Cycle: Explaining International Comovements," American Economic Review, American Economic Association, vol. 85(1), pages 168-85, March.
  16. Brock, William & Xepapadeas, Anastasios, 2010. "Pattern formation, spatial externalities and regulation in coupled economic-ecological systems," Journal of Environmental Economics and Management, Elsevier, vol. 59(2), pages 149-164, March.
  17. 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.
  18. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
  19. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sectoral Level," IEHAS Discussion Papers 0803, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  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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