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Trade, growth and geography: A synthetic

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  • Dion, David-Pascal

Abstract

Economic integration affects economic development through two main channels: growth and localization of the economic activities. The theories of endogenous growth and economic geography enable us to understand these mechanisms. We study in this paper their similarities and specificities before suggesting their useful combination within a single model. Indeed, both theories are based on the same Spence-Dixit-Stiglitz monopolistic competition framework. However, they suggest two different approaches to deal with the impact of economic integration. We consider that a third path, by proposing a synthetic approach, better answers the issues raised in terms of economic convergence and divergence by these two sets of models.

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Paper provided by Free University of Berlin, Humboldt University of Berlin, University of Bonn, University of Mannheim, University of Munich in its series Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems with number 22.

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Date of creation: Mar 2004
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Handle: RePEc:trf:wpaper:22

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Keywords: regional economic integration; endogenous growth; economic geography;

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  1. Romer, Paul M, 1987. "Growth Based on Increasing Returns Due to Specialization," American Economic Review, American Economic Association, vol. 77(2), pages 56-62, May.
  2. Hanson, Gordon H, 1997. "Increasing Returns, Trade and the Regional Structure of Wages," Economic Journal, Royal Economic Society, vol. 107(440), pages 113-33, January.
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