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Structural Change, Urban Congestion, and the End of Growth

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  • Grossmann, Volker

Abstract

This paper develops a two-sector R&D-based growth model with congestion effects from increasing urban population density. We show that endogenous technologicalprogress causes structural change if there are positive productivity spillovers from the modern to the traditional sector and Engel’s law holds. In turn, urban congestion effects cause a productivity slowdown in the modern sector. Eventually, economic growth may cease in the long-run. We also show that land dilution from a higher workforce may give rise to negative scale effects on GDP per capita. Finally, we investigate how the optimal land allocation depends on the strength of urban congestion effects. --

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Bibliographic Info

Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis with number 48712.

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Date of creation: 2011
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Handle: RePEc:zbw:vfsc11:48712

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Web page: http://www.socialpolitik.org/
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Keywords: Congestion; Endogenous growth; Engel’s law; Structural change; Urbanization;

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  1. L. Rachel Ngai & Christopher Pissarides, 2005. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics, London School of Economics and Political Science, LSE Library 4656, London School of Economics and Political Science, LSE Library.
  2. Robert J. Barro & Xavier Sala-i-Martin, 1990. "Public Finance in Models of Economic Growth," NBER Working Papers 3362, National Bureau of Economic Research, Inc.
  3. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521725200.
  4. repec:fth:stanho:e-92-3 is not listed on IDEAS
  5. Holger Strulik, 2001. "The Role of Human Capital and Population Growth in R&D-Based Models of Economic Growth," Quantitative Macroeconomics Working Papers, Hamburg University, Department of Economics 20109, Hamburg University, Department of Economics.
  6. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 1997. "Beyond Balanced Growth," NBER Working Papers 6159, National Bureau of Economic Research, Inc.
  7. Henderson, Vernon, 2003. " The Urbanization Process and Economic Growth: The So-What Question," Journal of Economic Growth, Springer, Springer, vol. 8(1), pages 47-71, March.
  8. Kiminori Matsuyama, 1991. "Agricultural Productivity, Comparative Advantage and Economic Growth," NBER Working Papers 3606, National Bureau of Economic Research, Inc.
  9. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," NBER Working Papers 12475, National Bureau of Economic Research, Inc.
  10. Timo Boppart, 2010. "Engel's Law and Growth with Directed Technical Change," DEGIT Conference Papers c015_017, DEGIT, Dynamics, Economic Growth, and International Trade.
  11. Glomm, Gerhard & Ravikumar, B., 1994. "Public investment in infrastructure in a simple growth model," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 18(6), pages 1173-1187, November.
  12. de la Grandville,Olivier, 2009. "Economic Growth," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521898010.
  13. Andreas Irmen & Johanna Kühnel, 2008. "Productive Government Expenditure and Economic Growth," Working Papers 0464, University of Heidelberg, Department of Economics, revised May 2008.
  14. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  15. Glomm, Gerhard & Ravikumar, B., 1997. "Productive government expenditures and long-run growth," Journal of Economic Dynamics and Control, Elsevier, Elsevier, vol. 21(1), pages 183-204, January.
  16. Holger Strulik, 2005. "Too Much of a Good Thing? The Quantitative Economics of R&D–driven Growth Revisited," Discussion Papers 05-26, University of Copenhagen. Department of Economics.
  17. Grossmann, Volker, 2009. "Entrepreneurial innovation and economic growth," Journal of Macroeconomics, Elsevier, Elsevier, vol. 31(4), pages 602-613, December.
  18. Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, Elsevier, vol. 62(2), pages 343-361, August.
  19. Dalgaard, Carl-Johan & Kreiner, Claus Thustrup, 2001. " Is Declining Productivity Inevitable?," Journal of Economic Growth, Springer, Springer, vol. 6(3), pages 187-203, September.
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