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A Spatial Model of Growth: Taking Technology Seriously

  • Zuoquan Zhao

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    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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    File URL: ftp://papers.econ.mpg.de/egp/discussionpapers/2006-12.pdf
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    Paper provided by Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group in its series Papers on Entrepreneurship, Growth and Public Policy with number 2006-12.

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    Length: 12 pages
    Date of creation: May 2006
    Date of revision:
    Handle: RePEc:esi:egpdis:2006-12
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    1. Fine, Ben, 2000. "Endogenous Growth Theory: A Critical Assessment," Cambridge Journal of Economics, Oxford University Press, vol. 24(2), pages 245-65, March.
    2. 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.
    3. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-40, June.
    4. Johansson, Börje & Quigley, John M., 2004. "Agglomeration and Networks in Spatial Economies," Berkeley Program on Housing and Urban Policy, Working Paper Series qt6g49t7n4, Berkeley Program on Housing and Urban Policy.
    5. 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.
    6. Robert J. Barro, 1998. "Notes on Growth Accounting," NBER Working Papers 6654, National Bureau of Economic Research, Inc.
    7. 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 1111-20, December.
    8. 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.
    9. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
    10. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
    11. Papageorgiou, Yorgo Y & Smith, Terrence R, 1983. "Agglomeration as Local Instability of Spatially Uniform Steady-States," Econometrica, Econometric Society, vol. 51(4), pages 1109-19, July.
    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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