IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this paper or follow this series

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

  • Fabio Cerina
  • Francesco Mureddu

According to the New Economic Geography and Growth (NEGG) 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 R&D performing industrial sector. This departure, motivated by the evidence, introduces an anti-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. In particular, the economy as a whole might suffer a dynamic loss from agglomeration when: 1) the spatial range of the technological spillovers within the R&D sector; 2) the external benefit of local and foreign knowledge capital on non-tradable sector productivity; 3) the expenditure share on non-tradable goods are all large enough. These results are consistent with the empirical evidence reporting regional real income divergence and according to which the trade-off between aggregate growth and interregional equity loses relevance in more advanced stages of development. Our conclusions have relevant policy implications as they suggest that, 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.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://degit.sam.sdu.dk/papers/degit_15/c015_022.pdf
Download Restriction: no

Paper provided by DEGIT, Dynamics, Economic Growth, and International Trade in its series DEGIT Conference Papers with number c015_022.

as
in new window

Length: 33 pages
Date of creation: Sep 2010
Date of revision:
Handle: RePEc:deg:conpap:c015_022
Contact details of provider: Postal: Niels Bohrs Vej 9, 6700 Esbjerg
Phone: +45 6550 2233
Fax: +45 6550 1090
Web page: http://degit.sam.sdu.dk/
Email:


More information through EDIRC

References listed on IDEAS
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.:

as in new window
  1. F. Cerina & F. Mureddu, 2011. "Structural Change and Growth in a NEG model," Working Paper CRENoS 201118, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  2. Kaiser, Ulrich, 2002. "Measuring knowledge spillovers in manufacturing and services: an empirical assessment of alternative approaches," Research Policy, Elsevier, vol. 31(1), pages 125-144, January.
  3. Baldwin, Richard & Martin, Philippe & Ottaviano, Gianmarco, 1998. "Global Income Divergence, Trade and Industrialization: The Geography of Growth Take-Offs," CEPR Discussion Papers 1803, C.E.P.R. Discussion Papers.
  4. Daron Acemoglu & Veronica Guerrieri, 2006. "Capital Deepening and Non-Balanced Economic Growth," NBER Working Papers 12475, National Bureau of Economic Research, Inc.
  5. Alan S. Blinder, 2005. "Fear of Offshoring," Working Papers 83, Princeton University, Department of Economics, Center for Economic Policy Studies..
  6. 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.
  7. Bhagwati, Jagdish N, 1984. "Why Are Services Cheaper in the Poor Countries?," Economic Journal, Royal Economic Society, vol. 94(374), pages 279-86, June.
  8. Baldwin, Richard E & Forslid, Rikard, 2000. "The Core-Periphery Model and Endogenous Growth: Stabilizing and Destabilizing Integration," Economica, London School of Economics and Political Science, vol. 67(267), pages 307-24, August.
  9. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers 3135, C.E.P.R. Discussion Papers.
  10. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
  11. Fabio Cerina & Francesco Mureddu, 2012. "Agglomeration And Growth With Endogenous Expenditure Shares," Journal of Regional Science, Wiley Blackwell, vol. 52(2), pages 324-360, 05.
  12. Kuznets, Simon, 1971. "Modern Economic Growth: Findings and Reflections," Nobel Prize in Economics documents 1971-2, Nobel Prize Committee.
  13. Wolfgang Keller, 2000. "Geographic Localization of International Technology Diffusion," NBER Working Papers 7509, National Bureau of Economic Research, Inc.
  14. Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  15. Marius BRÜLHART & Federica SBERGAMI, 2008. "Agglomeration and Growth : Cross-Country Evidence," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 08.04, Université de Lausanne, Faculté des HEC, DEEP.
  16. Giovanni Cerulli & Bianca Poti`, 2009. "Measuring Intersectoral Knowledge Spillovers: An Application Of Sensitivity Analysis To Italy," Economic Systems Research, Taylor & Francis Journals, vol. 21(4), pages 409-436.
  17. Murata, Yasusada, 2008. "Engel's law, Petty's law, and agglomeration," Journal of Development Economics, Elsevier, vol. 87(1), pages 161-177, August.
  18. Nuria Quella, 2009. "Knowledge Spillovers and TFP Growth Rates," Department of Economics Working Papers 09-03, Stony Brook University, Department of Economics.
  19. Behrens, Kristian, 2004. "Agglomeration without trade: how non-traded goods shape the space-economy," Journal of Urban Economics, Elsevier, vol. 55(1), pages 68-92, January.
  20. R. Paci & F. Pigliaru, 2001. "Technological Diffusion, Spatial Spillovers And Regional Convergence In Europe," Working Paper CRENoS 200101, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  21. Vasco Leite & Sofia B.S.D. Castro & João Correia-da-Silva, 2009. "A third sector in the core-periphery model: non-tradable goods," FEP Working Papers 352, Universidade do Porto, Faculdade de Economia do Porto.
  22. Paul Romer, 1989. "Endogenous Technological Change," NBER Working Papers 3210, National Bureau of Economic Research, Inc.
  23. Fulvio, Castellacci, 2007. "Technological paradigms, regimes and trajectories: Manufacturing and service industries in a new taxonomy of sectoral patterns of innovation," MPRA Paper 26408, University Library of Munich, Germany.
  24. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  25. Vincent Dupont, 2007. "Do geographical agglomeration, growth and equity conflict?," Papers in Regional Science, Wiley Blackwell, vol. 86(2), pages 193-213, 06.
  26. Baldwin, Richard & Martin, Philippe, 2003. "Agglomeration and Regional Growth," CEPR Discussion Papers 3960, C.E.P.R. Discussion Papers.
  27. Hans van Meijl, 1997. "Measuring the Impact of Direct and Indirect R&D on the Productivity Growth of Industries: Using the Yale Technology Concordance," Economic Systems Research, Taylor & Francis Journals, vol. 9(2), pages 205-211.
  28. J. Vernon Henderson, Zmarak Shalizi, and Anthony J. Venables, 2001. "Geography and development," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 81-105, January.
  29. Timothy J. Bartik, 2003. "Local Economic Development Policies," Upjohn Working Papers and Journal Articles 03-91, W.E. Upjohn Institute for Employment Research.
  30. Park, Se-Hark & Chan, Kenneth S., 1989. "A cross-country input-output analysis of intersectoral relationships between manufacturing and services and their employment implications," World Development, Elsevier, vol. 17(2), pages 199-212, February.
  31. Philippe Martin & Gianmarco Ottaviano, 1996. "Growth and Agglomeration," Working Papers 1996-14, CEPII research center.
    • 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.
  32. Francisco J. Buera & Joseph P. Kaboski, 2009. "Can Traditional Theories of Structural Change Fit The Data?," Journal of the European Economic Association, MIT Press, vol. 7(2-3), pages 469-477, 04-05.
  33. Vincent Dupont & Philippe Martin, 2006. "Subsidies to poor regions and inequalities: some unpleasant arithmetic," Journal of Economic Geography, Oxford University Press, vol. 6(2), pages 223-240, April.
  34. Federica Sbergami, 2002. "Agglomeration and Economic Growth: Some Puzzles," IHEID Working Papers 02-2002, Economics Section, The Graduate Institute of International Studies.
  35. 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.
  36. 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.
  37. Busillo & Teo Muccigrosso & Guido Pellegrini & Ornella Tarola & Terribile, 2010. "Measuring the Impact of the European Regional Policy on Economic Growth: a Regression Discontinuity Design Approach," Working Papers 6/10, Sapienza University of Rome, DISS.
  38. Jungsoo Park, 2004. "International and Intersectoral R&D Spillovers in the OECD and East Asian Economies," Economic Inquiry, Western Economic Association International, vol. 42(4), pages 739-757, October.
  39. Henderson, Vernon, 2003. " The Urbanization Process and Economic Growth: The So-What Question," Journal of Economic Growth, Springer, vol. 8(1), pages 47-71, March.
  40. Puga, Diego, 2001. "European Regional Policies in Light of Recent Location Theories," CEPR Discussion Papers 2767, C.E.P.R. Discussion Papers.
  41. Tabuchi, Takatoshi & Thisse, Jacques-François, 2002. "Regional Specialization and Transport Costs," CEPR Discussion Papers 3542, C.E.P.R. Discussion Papers.
  42. Castellacci, Fulvio, 2008. "Structural change and the growth of industrial sectors: empirical test of a GPT model," MPRA Paper 27592, University Library of Munich, Germany.
  43. Ben Gardiner & Ron Martin & Tyler Peter, 2004. "Competitiveness, Productivity and Economic Growth across the European Regions," ERSA conference papers ersa04p333, European Regional Science Association.
  44. Giannetti, Mariassunta, 2002. "The effects of integration on regional disparities: Convergence, divergence or both?," European Economic Review, Elsevier, vol. 46(3), pages 539-567, March.
  45. Bianca Potì & Giovanni Cerulli, 2007. "Heterogeneity of innovation strategies and firms’ performance," CERIS Working Paper 200706, Institute for Economic Research on Firms and Growth - Moncalieri (TO).
  46. Giovanni Peri, 2005. "Determinants of Knowledge Flows and Their Effect on Innovation," The Review of Economics and Statistics, MIT Press, vol. 87(2), pages 308-322, May.
  47. Guerrieri, Paolo & Meliciani, Valentina, 2005. "Technology and international competitiveness: The interdependence between manufacturing and producer services," Structural Change and Economic Dynamics, Elsevier, vol. 16(4), pages 489-502, December.
  48. 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, 08.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:deg:conpap:c015_022. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jan Pedersen)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.