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Agglomeration and Growth in the NEG: a critical assessment

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  • F. Cerina

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  • F. Pigliaru

    ()

Abstract

This chapter is divided into two parts. In the first part we review the main results of a typical New Economic Geography and Growth (NEGG) model (Baldwin and Martin, 2003) and assess the contribution of this literature to the issue of long-run income gaps between countries. In the second part we discuss the robustness in some results of these models which are directly linked to important policy implications and we show that these results crucially depend on very restrictive values of some parameters of the model. In particular, depending on the different values of the degree of love for variety and the elasticity of substitution between traditional and manufacturing goods, our analytical examples reveal that - a) when trade is costly enough the symmetric equilibrium might not be stable also when capital is perfectly mobile; b) the rate of growth might depend on the geographical allocation of industries also when spillovers are global and, c) when industrial firms are concentrated in only one region, countries might not grow at the same rate in real terms.

Suggested Citation

  • F. Cerina & F. Pigliaru, 2005. "Agglomeration and Growth in the NEG: a critical assessment," Working Paper CRENoS 200510, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  • Handle: RePEc:cns:cnscwp:200510
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    1. Benassy, Jean-Pascal, 1996. "Taste for variety and optimum production patterns in monopolistic competition," Economics Letters, Elsevier, vol. 52(1), pages 41-47, July.
    2. 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.
    3. Rosina Moreno & Raffaele Paci & Stefano Usai, 2005. "Spatial spillovers and innovation activity in European regions," Environment and Planning A, Pion Ltd, London, vol. 37(10), pages 1793-1812, October.
    4. Baldwin, Richard E & Martin, Philippe & Ottaviano, Gianmarco I P, 2001. "Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs," Journal of Economic Growth, Springer, vol. 6(1), pages 5-37, March.
    5. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    6. 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 947-968, November.
    7. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    8. Baldwin, Richard E. & Martin, Philippe, 2004. "Agglomeration and regional growth," Handbook of Regional and Urban Economics,in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 60, pages 2671-2711 Elsevier.
    9. Baldwin, Richard E., 1999. "Agglomeration and endogenous capital," European Economic Review, Elsevier, vol. 43(2), pages 253-280, February.
    10. repec:hhs:iuiwop:430 is not listed on IDEAS
    11. Martin, Philippe & I.P. Ottaviano, Gianmarco, 1999. "Growing locations: Industry location in a model of endogenous growth," European Economic Review, Elsevier, vol. 43(2), pages 281-302, February.
    12. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    13. Richard E. Baldwin & Rikard Forslid, 1998. "Incremental Trade and Endogenous Growth: A q-Theory Approach," NBER Working Papers 6477, National Bureau of Economic Research, Inc.
    14. Adriana Di Liberto & Francesco Pigliaru & Roberto Mura, 2008. "How to measure the unobservable: a panel technique for the analysis of TFP convergence," Oxford Economic Papers, Oxford University Press, vol. 60(2), pages 343-368, April.
    15. Smulders, J.A. & van de Klundert, T.C.M.J., 2004. "Monopolistic competition and economic growth," Other publications TiSEM a0d31c9b-9be8-4137-ad77-b, Tilburg University, School of Economics and Management.
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    17. Yamamoto, Kazuhiro, 2003. "Agglomeration and growth with innovation in the intermediate goods sector," Regional Science and Urban Economics, Elsevier, vol. 33(3), pages 335-360, May.
    18. Flora Bellone & Marie-Antoinette Maupertuis, 2003. "Economic Integration and Regional Income Inequalities: Competing Dynamics of Regional Wages and Innovative Capabilities," Review of International Economics, Wiley Blackwell, vol. 11(3), pages 512-526, August.
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    Cited by:

    1. M. Deidda, 2014. "Insularity and economic development: a survey," Working Paper CRENoS 201407, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    2. Jan Ditzen, 2014. "Economic Growth and Migration," SEEC Discussion Papers 1406, Spatial Economics and Econometrics Centre, Heriot Watt University.
    3. Christ, Julian P., 2009. "New Economic Geography reloaded: Localized knowledge spillovers and the geography of innovation," FZID Discussion Papers 01-2009, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    4. Fabio Cerina & Francesco Mureddu, 2012. "Agglomeration And Growth With Endogenous Expenditure Shares," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 324-360, May.
    5. G. Marletto, 2006. "La politica dei trasporti come politica per l'innovazione: spunti da un approccio evolutivo," Working Paper CRENoS 200605, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    6. Manuela Deidda, 2016. "Insularity and economic development: a survey," International Review of Economics, Springer;Happiness Economics and Interpersonal Relations (HEIRS), vol. 63(2), pages 107-128, June.
    7. OA Carboni & G. Medda, 2007. "Government Size and the Composition of Public Spending in a Neoclassical Growth Model," Working Paper CRENoS 200701, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.

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