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Agglomeration and regional growth

In: Handbook of Regional and Urban Economics

  • Baldwin, Richard E.
  • Martin, Philippe

We review the theoretical links between growth and agglomeration. Growth, in the form of innovation, can be at the origin of catastrophic spatial agglomeration in a cumulative process a la Myrdal. One of the surprising features of the Krugman [Journal of Political Economy 99 (1991) 483-499] model, was that the introduction of partial labor mobility in a standard "new trade model" with trade costs could lead to catastrophic agglomeration. The growth analog to this result is that the introduction of endogenous growth in the same type of "new trade model" can lead to the same result. A difference with the labour mobility version is that the results are easier to derive from the analytical point of view in the endogenous growth version. We show that the relation between growth and agglomeration depends crucially on capital (human or physical) mobility between regions. The absence of capital mobility is at the heart of the possibility of spatial agglomeration with catastrophe. In addition, growth alters the process of location even without catastrophe. In particular, and contrary to the fundamentally static models of the New Economic Geography, spatial concentration of economic activities may be consistent with a process of delocation of firms towards poor regions. Finally, the presence of localized technology spillovers implies that spatial agglomeration is conducive to growth.

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This chapter was published in:
  • J. V. Henderson & J. F. Thisse (ed.), 2004. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 4, number 4.
  • This item is provided by Elsevier in its series Handbook of Regional and Urban Economics with number 4-60.
    Handle: RePEc:eee:regchp:4-60
    Contact details of provider: Web page: http://www.elsevier.com/wps/find/bookseriesdescription.cws_home/BS_HE/description

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    Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

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    1. Diego Puga, 1996. "The Rise and Fall of Regional Inequalities," CEP Discussion Papers dp0314, Centre for Economic Performance, LSE.
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    8. Duncan Black & Vernon Henderson, 1999. "A Theory of Urban Growth," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 252-284, April.
    9. Wolfgang Keller, 2000. "Geographic Localization of International Technology Diffusion," NBER Working Papers 7509, National Bureau of Economic Research, Inc.
    10. Baldwin, Richard E. & Forslid, Rikard, 2000. "Trade liberalisation and endogenous growth: A q-theory approach," Journal of International Economics, Elsevier, vol. 50(2), pages 497-517, April.
    11. Martin, Philippe & Rogers, Carol Ann, 1995. "Industrial location and public infrastructure," Journal of International Economics, Elsevier, vol. 39(3-4), pages 335-351, November.
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    13. Gianmarco I. P. Ottaviano, 1996. "The Location Effects of Isolation," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), vol. 132(III), pages 427-440, September.
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    15. Ciccone, Antonio, 2002. "Agglomeration effects in Europe," European Economic Review, Elsevier, vol. 46(2), pages 213-227, February.
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    17. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
    18. Philippe Martin & Gianmarco Ottaviano, 1996. "Growth and Agglomeration," Working Papers 1996-14, CEPII research center.
      • 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, vol. 42(4), pages 947-68, November.
    19. Jaffe, A.B. & Trajtenberg, M., 1992. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," Papers 14-92, Tel Aviv.
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    21. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers 3135, C.E.P.R. Discussion Papers.
    22. Philippe Aghion & Peter Howitt, 1997. "Endogenous Growth Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011662, June.
    23. Bottazzi, Laura, 2001. "Globalization and local proximity in innovation: A dynamic process," European Economic Review, Elsevier, vol. 45(4-6), pages 731-741, May.
    24. Williamson, Jeffrey G., 1988. "Migration and urbanization," Handbook of Development Economics, in: Hollis Chenery & T.N. Srinivasan (ed.), Handbook of Development Economics, edition 1, volume 1, chapter 11, pages 425-465 Elsevier.
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    26. Walz, Uwe, 1997. "Growth and Deeper Regional Integration in a Three-County Model," Review of International Economics, Wiley Blackwell, vol. 5(4), pages 492-507, November.
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