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Geography, Growth and Inequalities: Market Failures and Public Policy Implications

Author

Listed:
  • Benjamin Montmartin

    (SKEMA Business School
    Université Côte d'Azur
    OFCE Sciences.Po
    GREDEG CNRS)

Abstract

We propose a unique market and social planner solution for a generalized new economic geography and growth model that highlights the importance of taking into account the existence of agglomeration externalities in the analysis of market failures and public policies. Our model disentangles the underinvestment in R&D and the suboptimal growth link present in the previous endogenous growth model. Consequently, our framework allows the market economy to reach various steady-state situations. By evaluating the effects of two strategic policies implemented in the European Union, namely, an innovation and a cohesion policy, we highlight that the complementarity or substitutability of these policies to bring the economy closer to its optimum is directly related to the hypothesis made on the link between agglomeration and growth.

Suggested Citation

  • Benjamin Montmartin, 2022. "Geography, Growth and Inequalities: Market Failures and Public Policy Implications," GREDEG Working Papers 2022-03, Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France.
    • Handle: RePEc:gre:wpaper:2022-03
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    More about this item

    Keywords

    Agglomeration; growth; spatial income inequality; innovation and cohesion policies;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • H50 - Public Economics - - National Government Expenditures and Related Policies - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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