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Growth and Agglomeration

Author

Listed:
  • 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
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    Other versions of this item:

    • 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.

    More about this item

    Keywords

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    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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