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Growth and Agglomeration

Author

Listed:
  • Philippe Martin

    (CEPR - Center for Economic Policy Research)

  • Gianmarco Ottaviano

    (UNIBO - Alma Mater Studiorum Università di Bologna = University of Bologna)

Abstract

This article presents a model in which growth and geographic agglomeration of economic activities are mutually self-reinforcing processes. Economic agglomeration in one region spurs growth because it reduces the cost of innovation in that region through a pecuniary externality due to transaction costs. Growth fosters agglomeration because, as the sector at the origin of innovation expands, new firms tend to locate close to this sector. Agglomeration implies that all innovation and most production activities take place in the core region. However, as new firms are continuously created in the core, some relocate their production to the periphery.

Suggested Citation

  • Philippe Martin & Gianmarco Ottaviano, 2001. "Growth and Agglomeration," Post-Print hal-03416873, HAL.
    • Handle: RePEc:hal:journl:hal-03416873
    as

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    Other versions of this item:

    • 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 947-968, November.

    More about this item

    JEL classification:

    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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