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Spatial Development

  • Klaus Desmet

    (Universidad Carlos III de Madrid)

  • Esteban Rossi-Hansberg

    (Princeton University)

We present a theory of spatial development. A continuum of locations in a geographic area choose each period how much to innovate (if at all) in manufacturing and services. Locations can trade subject to transport costs and technology diffuses spatially across locations. The result is an endogenous growth theory that can shed light on the link between the evolution of economic activity over time and space. We apply the model to study the evolution of the U.S. economy in the last few decades and find that the model can generate the reduction in the employment share in manufacturing, the increase in service productivity in the second part of the 1990s, the increase in land rents in the same period, as well as several other spatial and temporal patterns.

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Paper provided by Fondazione Eni Enrico Mattei in its series Working Papers with number 2010.26.

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Date of creation: Mar 2010
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Handle: RePEc:fem:femwpa:2010.26
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  1. Klaus Desmet & Esteban Rossi-Hansberg, 2007. "Spatial Growth and Industry Age," NBER Working Papers 13302, National Bureau of Economic Research, Inc.
  2. Alan C. Stockman & Linda L. Tesar, 1991. "Tastes and technology in a two-country model of the business cycle: explaining international co-movements," Working Paper 9019, Federal Reserve Bank of Cleveland.
  3. Jonathan Eaton & Samuel Kortum, 2002. "Technology, Geography, and Trade," Econometrica, Econometric Society, vol. 70(5), pages 1741-1779, September.
  4. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  5. Brock, William & Xepapadeas, Anastasios, 2010. "Pattern formation, spatial externalities and regulation in coupled economic-ecological systems," Journal of Environmental Economics and Management, Elsevier, vol. 59(2), pages 149-164, March.
  6. Francisco J. Buera & Joseph P. Kaboski, 2009. "The Rise of the Service Economy," NBER Working Papers 14822, National Bureau of Economic Research, Inc.
  7. Boucekkine, Raouf & Camacho, Carmen & Zou, Benteng, 2009. "Bridging The Gap Between Growth Theory And The New Economic Geography: The Spatial Ramsey Model," Macroeconomic Dynamics, Cambridge University Press, vol. 13(01), pages 20-45, February.
  8. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
  9. L. Rachel Ngai & Christopher Pissarides, 2005. "Structural change in a multi-sector model of growth," LSE Research Online Documents on Economics 4656, London School of Economics and Political Science, LSE Library.
  10. Herrendorf, Berthold & Valentinyi, Akos, 2007. "Measuring Factor Income Shares at the Sector Level - A Primer," CEPR Discussion Papers 6271, C.E.P.R. Discussion Papers.
  11. Ventura, Jaume, 1997. "Growth and Interdependence," The Quarterly Journal of Economics, MIT Press, vol. 112(1), pages 57-84, February.
  12. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December.
  13. Carlino, Gerald A. & Chatterjee, Satyajit & Hunt, Robert M., 2007. "Urban density and the rate of invention," Journal of Urban Economics, Elsevier, vol. 61(3), pages 389-419, May.
  14. Davis, Morris & Heathcote, Jonathan, 2005. "The Price and Quantity of Residential Land in the United States," CEPR Discussion Papers 5333, C.E.P.R. Discussion Papers.
  15. Danny Quah, 2002. "Spatial Agglomeration Dynamics," American Economic Review, American Economic Association, vol. 92(2), pages 247-252, May.
  16. Danny Quah, 2002. "Spatial Agglomeration Dynamics," CEP Discussion Papers dp0521, Centre for Economic Performance, LSE.
  17. Akos Valentinyi & Berthold Herrendorf, 2008. "Measuring Factor Income Shares at the Sectoral Level," IEHAS Discussion Papers 0803, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  18. Brock, William & Xepapadeas, Anastasios, 2008. "Diffusion-induced instability and pattern formation in infinite horizon recursive optimal control," Journal of Economic Dynamics and Control, Elsevier, vol. 32(9), pages 2745-2787, September.
  19. Baldwin, Richard & Martin, Philippe, 2003. "Agglomeration and Regional Growth," CEPR Discussion Papers 3960, C.E.P.R. Discussion Papers.
  20. Eaton, Jonathan & Kortum, Samuel, 1999. "International Technology Diffusion: Theory and Measurement," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(3), pages 537-70, August.
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