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A Spatial Model of Growth: Taking Technology Seriously

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  • Zuoquan Zhao

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Abstract

This paper attempts to develop a spatial model of economic growth in which technology and externalities are assumed to be accountable for production in geographical space. Linking externalities to the extent of intensity of production across locations in continuous space, we introduce spatial range into the production function for technological, human, and physical capitals. Our model argues that the long-run growth rate of an economy is determined not just by the growth rates of the three factors of production but by their rates of change in spatial range over the territory of the economy. In other words, spatial intensity and accumulation matter for growth. Our model is consistent with studies on knowledge spillovers, geographical agglomeration, urban and regional growth, and trade. The primary policy implication of our model is the significance of establishing efficient mechanisms or channels that promote innovation, diffusion, trade, and factor mobility over the territory of an economy. It is not as if we always have it everywhere, but there is a process in which knowledge is being created all the time in different places, and is then being diffused. This evolving distribution should be reflected in a model of production, if it is to describe an entire economy in which different people know different things. As a consequence, the idea of an aggregate production function becomes very dubious, unless a new variable is introduced, representing the distribution and diffusion of new knowledge.

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  • Zuoquan Zhao, 2006. "A Spatial Model of Growth: Taking Technology Seriously," Papers on Entrepreneurship, Growth and Public Policy 2006-12, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
  • Handle: RePEc:esi:egpdis:2006-12
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    File URL: ftp://papers.econ.mpg.de/egp/discussionpapers/2006-12.pdf
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    References listed on IDEAS

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    1. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
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    3. Masahisa Fujita & Jacques‐François Thisse, 2003. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses from It?," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 121-145, June.
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    9. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
      • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    10. Gort, Michael & Konakayama, Akira, 1982. "A Model of Diffusion in the Production of an Innovation," American Economic Review, American Economic Association, vol. 72(5), pages 1111-1120, December.
    11. Fine, Ben, 2000. "Endogenous Growth Theory: A Critical Assessment," Cambridge Journal of Economics, Oxford University Press, vol. 24(2), pages 245-265, March.
    12. 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.
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