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Urban agglomeration and the aggregate economic growth

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  • Domingo Pérez Ximénez-De-Embún
  • Marcos Sanso

Abstract

This paper presents a theoretical approach to solve the main problems faced to explain the relationship between aggregate economic growth and the urban structure. The most significant conclusion reached is that there is a theoretical relationship between aggregate economic growth and urban concentration with an inverted-U shape. This result had been previously found in an empirical context (Henderson, 2003), but not as outcome of a theoretical model. An overlapping generations model with four different types of goods (some with both technological and local externalities) and two cities where their production could be located provides the dynamics of the movements of labor and goods across cities. The resulting system of two cities with different patterns of specialization, urban concentration and economic growth rates, makes clear how to set out the comparison of aggregate growth rates: only the aggregate growth rate between two steady states, one without migration but with trade specialization and the other after migration and specialization, makes sense. Henderson, V. (2003), The Urbanization Process and Economic Growth: The So-What Question, Journal of Economic Growth, 8, 47-71.

Suggested Citation

  • Domingo Pérez Ximénez-De-Embún & Marcos Sanso, 2011. "Urban agglomeration and the aggregate economic growth," ERSA conference papers ersa11p884, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa11p884
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    References listed on IDEAS

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    1. Bertinelli, Luisito & Black, Duncan, 2004. "Urbanization and growth," Journal of Urban Economics, Elsevier, vol. 56(1), pages 80-96, July.
    2. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December.
    3. J. Vernon Henderson & Hyoung Gun Wang, 2005. "Aspects of the rural-urban transformation of countries," Journal of Economic Geography, Oxford University Press, vol. 5(1), pages 23-42, January.
    4. Luisito Bertinelli & Eric Strobl, 2007. "Urbanisation, Urban Concentration and Economic Development," Urban Studies, Urban Studies Journal Limited, vol. 44(13), pages 2499-2510, December.
    5. Kemnitz, Alexander, 2001. "Endogenous growth and the gains from immigration," Economics Letters, Elsevier, vol. 72(2), pages 215-218, August.
    6. Henderson, J. Vernon, 2005. "Urbanization and Growth," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 1, chapter 24, pages 1543-1591, Elsevier.
    7. Henderson, Vernon, 2003. "The Urbanization Process and Economic Growth: The So-What Question," Journal of Economic Growth, Springer, vol. 8(1), pages 47-71, March.
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