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Growth and Agglomeration

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  • Martin, Philippe
  • Ottaviano, Gianmarco

Abstract

This paper presents a model in which growth and geographic agglomeration of economic activities are mutually self reinforcing processes. Industrial agglomeration in one location spurs growth because it reduces the cost of innovation in that location through a pecuniary externality due to transaction costs. Growth fosters agglomeration because as the sector at the origin of innovation expands, new firms tend to locate close to this sector. The model can be interpreted as illustrating one mechanism behind the emergence of cities seen as centres for production and innovation, and is consistent with the episodes of simultaneous increases in growth rates and spatial agglomeration.

Suggested Citation

  • Martin, Philippe & Ottaviano, Gianmarco, 1996. "Growth and Agglomeration," CEPR Discussion Papers 1529, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:1529
    as

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    • 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.

    References listed on IDEAS

    as
    1. Philippe Martin & Gianmarco I.P. Ottaviano, 2021. "Growing locations: Industry location in a model of endogenous growth," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    2. Flam, Harry & Helpman, Elhanan, 1987. "Industrial policy under monopolistic competition," Journal of International Economics, Elsevier, vol. 22(1-2), pages 79-102, February.
    3. 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.
    4. Romer, Paul M, 1990. "Endogenous Technological Change," Journal of Political Economy, University of Chicago Press, vol. 98(5), pages 71-102, October.
    5. 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.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Agglomeration; Cities; Endogenous Growth; Technological Progress;
    All these keywords.

    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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