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Structural Change, Urban Congestion, and the End of Growth

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  • Volker Grossmann

Abstract

This paper develops a two-sector R&D-based growth model with congestion effects from increasing urban population density. We show that endogenous technological progress causes structural change if there are positive productivity spillovers from the modern to the traditional sector and Engel’s law holds. In turn, urban congestion effects cause a productivity slowdown in the modern sector. Eventually, economic growth may cease in the long-run. We also show that land dilution from a higher workforce may give rise to negative scale effects on GDP per capita. Finally, we investigate how the optimal land allocation depends on the strength of urban congestion effects.

Suggested Citation

  • Volker Grossmann, 2011. "Structural Change, Urban Congestion, and the End of Growth," DEGIT Conference Papers c016_005, DEGIT, Dynamics, Economic Growth, and International Trade.
  • Handle: RePEc:deg:conpap:c016_005
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    File URL: http://degit.sam.sdu.dk/papers/degit_16/c016_005.pdf
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    References listed on IDEAS

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    Cited by:

    1. Klarl, Torben Alexander, 2015. "Urban-rural migration and congestion costs revisited: is there a triple dividend for cities in developing countries?," VfS Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112829, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Congestion; Endogenous growth; Engel’s law; Structural change; Urbanization;
    All these keywords.

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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