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Agglomeration and Knowledge Diffusion

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  • Bröcker, Johannes
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    Abstract

    According to New Growth Theory one can not rely on the convergence mechanisms inherent in traditional neoclassical constant returns to scale models. Convergence as well as divergence is possible, in general, depending on the assumptions about technology, factor mobility and ease of knowledge diffusion. The paper shows by a two-regions endogenous growth model under what conditions divergence, convergence or a stable centre-periphery structure emerge. The model allows for different degrees of knowledge diffusion as well as for different degrees of labor and capital mobility. The paper also evaluates dynamic market equilibria with respect to allocative efficiency. It is shown that the market solution tends to be under-agglomerated, except for parameter constellations generating particularly low agglomeration forces. If agglomeration forces are low enough, no concentration emerges, and this is also socially desirable. For higher agglomeration forces, however, concentration becomes desirable though the market may not bring it about or brings it about to an insufficient degree only. --

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    File URL: http://econstor.eu/bitstream/10419/21984/1/EWP-2004-08.pdf
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    Bibliographic Info

    Paper provided by Christian-Albrechts-University of Kiel, Department of Economics in its series Economics Working Papers with number 2004,08.

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    Date of creation: 2004
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    Handle: RePEc:zbw:cauewp:2283

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    Keywords: Convergence; divergence; agglomeration; endogenous growth; knowledge diffusion;

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    1. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    2. Fujita, Masahisa & Thisse, Jacques-Francois, 1996. "Economics of Agglomeration," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 339-378, December.
    3. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers, Tel Aviv 14-92, Tel Aviv.
    4. Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Growth and Agglomeration," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 42(4), pages 947-68, November.
    5. Baldwin, Richard E., 2001. "Core-periphery model with forward-looking expectations," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 31(1), pages 21-49, February.
    6. Baldwin, Richard & Forslid, Rikard, 1997. "The Core-Periphery Model and Endogenous Growth," CEPR Discussion Papers, C.E.P.R. Discussion Papers 1749, C.E.P.R. Discussion Papers.
    7. Richard E. Baldwin & Rikard Forslid, 1996. "Trade Liberalization and Endogenous Growth: A q-Theory Approach," NBER Working Papers 5549, National Bureau of Economic Research, Inc.
    8. Baldwin, Richard E & Forslid, Rikard, 2000. "The Core-Periphery Model and Endogenous Growth: Stabilizing and Destabilizing Integration," Economica, London School of Economics and Political Science, London School of Economics and Political Science, vol. 67(267), pages 307-24, August.
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