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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. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages S71-102, October.
    2. Martin, Philippe & Ottaviano, Gianmarco, 1996. "Growing Locations: Industry Location in a Model of Endogenous Growth," CEPR Discussion Papers 1523, C.E.P.R. Discussion Papers.
    3. Baldwin, Richard E. & Martin, Philippe & Ottaviano, Gianmarco I.P., 1998. "Global Income Divergence, Trade and Industrialisation: The Geography of Growth Take-Offs," Working Paper Series 496, Research Institute of Industrial Economics.
    4. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
    5. Philippe Aghion & Peter Howitt, 1997. "Endogenous Growth Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262011662.
    6. Martin, Philippe & Ottaviano, Gianmarco, 1996. "Growth and Agglomeration," CEPR Discussion Papers 1529, C.E.P.R. Discussion Papers.
      • 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.
    7. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
    8. Quah, Danny, 2002. "Spatial Agglomeration Dynamics," CEPR Discussion Papers 3208, C.E.P.R. Discussion Papers.
    9. Gilles Duranton & Diego Puga, 2000. "Nursery cities: urban diversity, process innovation and the life-cycle of products," LSE Research Online Documents on Economics 20204, London School of Economics and Political Science, LSE Library.
    10. OTTAVIANO, Gianmarco & TABUCHI , Takatoshi & THISSE, Jacques-François, . "Agglomeration and trade revisited," CORE Discussion Papers RP 1553, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
    11. Bottazzi, Laura, 2001. "Globalization and local proximity in innovation: A dynamic process," European Economic Review, Elsevier, vol. 45(4-6), pages 731-741, May.
    12. Masahisa Fujita & Jacques-François Thisse, 2003. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses from It?," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 121-145.
    13. Richard E. Baldwin & Rikard Forslid, 1999. "The Core-Periphery Model and Endogenous Growth: Stabilising and De-Stabilising Integration," NBER Working Papers 6899, National Bureau of Economic Research, Inc.
    14. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
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    16. Dieter M. Urban, 2007. "Neoclassical Growth, Manufacturing Agglomeration, and Terms of Trade," Review of International Economics, Wiley Blackwell, vol. 15(5), pages 1014-1035, November.
    17. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 577-598.
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    27. repec:hhs:iuiwop:430 is not listed on IDEAS
    28. 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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