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Agglomeration and regional growth policy: externalities versus comparative advantages

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  • Argentino Pessoa

Abstract

This paper explores the existence of different types of static and dynamic externalities and shows the relationship between externalities, interregional trade, and cluster policy. By guiding policy in choosing the most appropriate strategy for facing some frequent dilemmas, this paper has clear implications in regional development policy and adds to the existent literature in three ways. First, it contributes to a better characterization of dynamic externalities by extending the “advantages of backwardness” approach, formerly developed to explain the catching-up of national economies, to the regional context. Second, the paper presents a new model that relates static and dynamic externalities to the clustering mode of production in the regional context. Third, the paper contributes to give a more accurate theoretic basis to the regional cluster policy and to help policy-makers in choosing the right policy for increasing the well-being of depressed regions. The major conclusion is that policy must pursue a combination of the comparative advantage principle with one type of dynamic externalities uncovered in this paper: the “related variety benefits” of agglomeration. Copyright Springer-Verlag Berlin Heidelberg 2014

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  • Argentino Pessoa, 2014. "Agglomeration and regional growth policy: externalities versus comparative advantages," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 53(1), pages 1-27, August.
    • Handle: RePEc:spr:anresc:v:53:y:2014:i:1:p:1-27
    DOI: 10.1007/s00168-014-0625-1
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    JEL classification:

    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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