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Is Agglomeration really good for Growth? Global Efficiency, Interregional Equity and Uneven Growth

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  • F. Cerina

  • F. Mureddu

Abstract

According to NEG literature (Baldwin et al. (2004)), spatial concentration of industrial activities increases growth at the regional and aggregate level without generating regional growth differentials. This view is not supported by the data. We extend the canonical model with an additional sector producing non-tradable goods which benefits from localized knowledge spillovers coming from the R&D performing industrial sector. This view, motivated by the evidence, generates both an anti-growth and a pro-growth effect of agglomeration for both the deindustrializing and the industrializing regions and leads to two novel results - 1) when agglomeration takes place, growth is lower in the periphery; 2) agglomeration may have a negative effect on the growth rate of real income, both at the regional and at the aggregate level. Our conclusions have relevant policy implications - contrary to the standard view, current EU and US regional policies favouring industrial dispersion might be welfare-improving both at the regional and the aggregate level and may reduce regional income disparities.

Suggested Citation

  • F. Cerina & F. Mureddu, 2009. "Is Agglomeration really good for Growth? Global Efficiency, Interregional Equity and Uneven Growth," Working Paper CRENoS 200913, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
    • Handle: RePEc:cns:cnscwp:200913
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    Cited by:

    1. Yang, Senmiao & Jiang, Wanxin & Wang, Jianda, 2025. "How does ICT agglomeration promote green technology innovation? Evidence from Yangtze River Delta in China," Energy Economics, Elsevier, vol. 147(C).
    2. Cazzuffi, Chiara & Pereira-López, Mariana & Soloaga, Isidro, 2017. "Local poverty reduction in Chile and Mexico: The role of food manufacturing growth," Food Policy, Elsevier, vol. 68(C), pages 160-185.
    3. Priscila MÉNDEZ & Sheila GUARNIZO & Rafael ALVARADO, 2019. "Nexo Causal Entre La Urbanización Y La Producción Regional: Evidencia Para Ecuador Usando Vi En Econometría Espacial," Regional and Sectoral Economic Studies, Euro-American Association of Economic Development, vol. 19(1), pages 63-76.
    4. Berdegué, Julio A. & Escobal, Javier & Bebbington, Anthony, 2015. "Explaining Spatial Diversity in Latin American Rural Development: Structures, Institutions, and Coalitions," World Development, Elsevier, vol. 73(C), pages 129-137.
    5. Vasco Leite & Sofia Castro & João Correia-da-Silva, 2013. "A third sector in the core-periphery model: non-tradable goods," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 50(1), pages 71-108, February.
    6. Yantuan Yu & Yun Zhang & Xiao Miao, 2018. "Impacts of Dynamic Agglomeration Externalities on Eco-Efficiency: Empirical Evidence from China," IJERPH, MDPI, vol. 15(10), pages 1-27, October.
    7. Yi Ren & Yuan Tian & Chengqiu Zhang, 2022. "Investigating the mechanisms among industrial agglomeration, environmental pollution and sustainable industrial efficiency: a case study in China," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 24(11), pages 12467-12493, November.
    8. Lei Nie & Yuanyuan Wang & Yanrui Wu, 2024. "Service sector agglomeration and industrial structure optimisation: evidence from China's resource‐based cities," Asian-Pacific Economic Literature, The Crawford School, The Australian National University, vol. 38(2), pages 3-21, November.
    9. Fabio Cerina & Francesco Mureddu, 2013. "Structural Change and Growth in a NEG Model," Review of Development Economics, Wiley Blackwell, vol. 17(2), pages 182-200, May.
    10. Xiaohu Li & Xigang Zhu & Jianshu Li & Chao Gu, 2021. "Influence of Different Industrial Agglomeration Modes on Eco-Efficiency in China," IJERPH, MDPI, vol. 18(24), pages 1-23, December.
    11. Patricio Aroca & Carlos Azzoni & Mauricio Sarrias, 2018. "Regional concentration and national economic growth in Brazil and Chile," Letters in Spatial and Resource Sciences, Springer, vol. 11(3), pages 343-359, October.
    12. Kümpel, Arndt, 2011. "Устойчивое региональное развитие, инновации и государствeнный потенциал [Sustainable regional development, innovation and state capacity]," MPRA Paper 33967, University Library of Munich, Germany, revised 08 Oct 2011.
    13. Shoulin Li & Jianing Liu & Weiya Guo, 2025. "Empowered or Negative? Research on the Impact of Industrial Agglomeration on the Development of Agricultural New Quality Productive Forces: Evidence from Shandong Province, China," Sustainability, MDPI, vol. 17(8), pages 1-23, April.
    14. Marko Danon, 2014. "Constructing a Novel Competitiveness Index for European Regions," GREDEG Working Papers 2014-42, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    15. Huang, Qiong & Chand, Satish, 2015. "Spatial spillovers of regional wages: Evidence from Chinese provinces," China Economic Review, Elsevier, vol. 32(C), pages 97-109.
    16. Kümpel, Arndt, 2011. "Sustainable regional development, innovation and state capacity," MPRA Paper 33966, University Library of Munich, Germany, revised 08 Oct 2011.
    17. Wei Han & Ying Zhang & Jianming Cai & Enpu Ma, 2019. "Does Urban Industrial Agglomeration Lead to the Improvement of Land Use Efficiency in China? An Empirical Study from a Spatial Perspective," Sustainability, MDPI, vol. 11(4), pages 1-22, February.
    18. Mohamed Bilel Triki, 2019. "The Italian wage curve revisited: A local and spatial cointegration," Applied Econometrics, Russian Presidential Academy of National Economy and Public Administration (RANEPA), vol. 55, pages 73-90.
    19. Wu, Rongxin & Lin, Boqiang, 2021. "Does industrial agglomeration improve effective energy service: An empirical study of China’s iron and steel industry," Applied Energy, Elsevier, vol. 295(C).
    20. Wei, Wei & Zhang, Wan-Li & Wen, Jun & Wang, Jun-Sheng, 2020. "TFP growth in Chinese cities: The role of factor-intensity and industrial agglomeration," Economic Modelling, Elsevier, vol. 91(C), pages 534-549.
    21. Luisa Alamá-Sabater & Yolanda de Llanos & Miguel Á. Márquez & Emili Tortosa-Ausina, 2025. "Evaluating the spatial mismatch between population and factor endowments: The case of the European Union," Regional Studies, Taylor & Francis Journals, vol. 59(1), pages 2387811-238, December.

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    Keywords

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    JEL classification:

    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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