IDEAS home Printed from https://ideas.repec.org/p/vid/wpaper/0901.html
   My bibliography  Save this paper

Agglomeration and population ageing in a two region model of exogenous growth

Author

Listed:
  • Theresa Grafeneder-Weissteiner
  • Klaus Prettner

Abstract

This article investigates the effects of introducing demography into the New Economic Geography. We generalize the constructed capital approach, which relies on infinite individual planning horizons, by introducing mortality. The resulting overlapping generation framework with heterogeneous individuals allows us to study the effects of ageing on agglomeration processes by analytically identifying the level of trade costs that triggers catastrophic agglomeration. Interestingly, this threshold value is rather sensitive to changes in mortality. In particular, the introduction of a positive mortality rate makes the symmetric equilibrium more stable and therefore counteracts agglomeration tendencies. In sharp contrast to other New Economic Geography approaches, this implies that deeper integration is not necessarily associated with higher interregional inequality.

Suggested Citation

  • Theresa Grafeneder-Weissteiner & Klaus Prettner, 2009. "Agglomeration and population ageing in a two region model of exogenous growth," VID Working Papers 0901, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna.
  • Handle: RePEc:vid:wpaper:0901
    as

    Download full text from publisher

    File URL: http://www.oeaw.ac.at/fileadmin/subsites/Institute/VID/PDF/Publications/Working_Papers/WP2009_01.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gstach, Dieter & Grandner, Thomas, 1998. "Restricted immigration in a two-sector economy," Department of Economics Working Paper Series 55, WU Vienna University of Economics and Business.
    2. Fabio Rumler, 1999. "Computable General Equilibrium Modeling, Numerical Simulations in a 2-Country Monetary General Equilibrium Model," Department of Economics Working Papers wuwp065, Vienna University of Economics and Business, Department of Economics.
    3. Wilfried Altzinger, 1998. "Austria's Foreign Direct Investment in Central and Eastern Europe: 'Supply Based' or 'Market Driven'?," Department of Economics Working Papers wuwp057, Vienna University of Economics and Business, Department of Economics.
    4. Dockner, Engelbert J, 1992. "A Dynamic Theory of Conjectural Variations," Journal of Industrial Economics, Wiley Blackwell, vol. 40(4), pages 377-395, December.
    5. Martin Zagler, 2011. "Endogenous Growth, Efficiency Wages, and Persistent Unemployment," Review of Economics & Finance, Better Advances Press, Canada, vol. 1, pages 34-42, April.
    6. Zhang, Jie & Zhang, Junsen & Lee, Ronald, 2003. "Rising longevity, education, savings, and growth," Journal of Development Economics, Elsevier, vol. 70(1), pages 83-101, February.
    7. Sögner, Leopold, 1998. "Regulation of a complementary imputed good in an competitive environment," Department of Economics Working Paper Series 56, WU Vienna University of Economics and Business.
    8. Hansjoerg Klausinger, 2000. "Walras' Law and the IS-LM Model. A Tale of Progress and Regress," Department of Economics Working Papers wuwp069, Vienna University of Economics and Business, Department of Economics.
    9. Pasquale Commendatore & Ingrid Kubin, "undated". "The dynamics of wages and employment in a model of monopolistic competition and efficient bargaining," Modeling, Computing, and Mastering Complexity 2003 03, Society for Computational Economics.
    10. Pasquale Commendatore & Ingrid Kubin & Carmelo Petraglia, 2009. "Footloose Capital and Productive Public Services," Chapters, in: Neri Salvadori & Pasquale Commendatore & Massimo Tamberi (ed.), Geography, Structural Change and Economic Development, chapter 1, Edward Elgar Publishing.
    11. Gstach, Dieter, 1998. "Small sample performance of two approaches to technical efficiency estimation in noisy multiple output environments," Department of Economics Working Paper Series 58, WU Vienna University of Economics and Business.
    12. Gstach, Dieter, 2003. "A statistical framework for estimating output-specific efficiencies," Department of Economics Working Paper Series 83, WU Vienna University of Economics and Business.
    13. Steven Brakman & Harry Garretsen & Marc Schramm, 2005. "Putting New Economic Geography to the Test: Free-ness of Trade and Agglomeration in the EU Regions," CESifo Working Paper Series 1566, CESifo Group Munich.
    14. Stiassny, Alfred, 1993. "TVP - Ein Programm zur Schätzung von Modellen mit zeitvariierenden Parametern," Department of Economics Working Paper Series 22, WU Vienna University of Economics and Business.
    15. Thomas Grandner, 2007. "Product differentiation in a linear city and wage bargaining," Department of Economics Working Papers wuwp109, Vienna University of Economics and Business, Department of Economics.
    16. Grandner, Thomas, 2000. "A note on unionized firms' incentive to integrate vertically," Department of Economics Working Paper Series 70, WU Vienna University of Economics and Business.
    17. Kocher, Martin G. & Luptacik, Mikulas & Sutter, Matthias, 2006. "Measuring productivity of research in economics: A cross-country study using DEA," Socio-Economic Planning Sciences, Elsevier, vol. 40(4), pages 314-332, December.
    18. Wilfried , Altzinger, 1992. "Ost-West-Migration ohne Steuerungsmöglichkeiten?," Department of Economics Working Paper Series 15, WU Vienna University of Economics and Business.
    19. Bellak, Christian, 2000. "The investment development path of Austria," Department of Economics Working Paper Series 75, WU Vienna University of Economics and Business.
    20. Munduch, Gerhard & Pfister, Alexander & Sögner, Leopold & Stiassny, Alfred, 2002. "Estimating marginal costs for the Austrian railway system," Department of Economics Working Paper Series 78, WU Vienna University of Economics and Business.
    21. Klausinger, Hansjörg, 1999. "The stability of full employment. A reconstruction of chapter 19-Keynesianism," Department of Economics Working Paper Series 63, WU Vienna University of Economics and Business.
    22. Thomas Grandner, 1996. "Is Wage-Leadership an Instrument to Coordinate Union's Wage-Policy? The Case of Imperfect Product Markets," Department of Economics Working Papers wuwp042, Vienna University of Economics and Business, Department of Economics.
    23. Eckhard Hein & Engelbert Stockhammer, 2010. "Macroeconomic Policy Mix, Employment and Inflation in a Post-Keynesian Alternative to the New Consensus Model," Review of Political Economy, Taylor & Francis Journals, vol. 22(3), pages 317-354.
    24. Gertler, Mark, 1999. "Government debt and social security in a life-cycle economy," Carnegie-Rochester Conference Series on Public Policy, Elsevier, vol. 50(1), pages 61-110, June.
    25. Dieter Gstach, 1998. "Technical Efficiency in Noisy Multi-Output Settings," Department of Economics Working Papers wuwp059, Vienna University of Economics and Business, Department of Economics.
    26. Ragacs, Christian & Steinberger, Thomas & Zagler, Martin, 1998. "Growth theories and the persistence of output fluctuations. The case of Austria," Department of Economics Working Paper Series 60, WU Vienna University of Economics and Business.
    27. Brakman, Steven & Garretsen, Harry & Schramm, Marc, 2006. "Putting new economic geography to the test: Free-ness of trade and agglomeration in the EU regions," Regional Science and Urban Economics, Elsevier, vol. 36(5), pages 613-635, September.
    28. Dieter Gstach, 1996. "A new approach to stochastic frontier estimation: DEA+," Department of Economics Working Papers wuwp039, Vienna University of Economics and Business, Department of Economics.
    29. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    30. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-359, May.
    31. Engelbert Stockhammer, 1999. "Robinsonian and Kaleckian Growth. An Update on Post-Keynesian Growth Theories," Department of Economics Working Papers wuwp067, Vienna University of Economics and Business, Department of Economics.
    32. Head, Keith & Mayer, Thierry, 2004. "The empirics of agglomeration and trade," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 59, pages 2609-2669, Elsevier.
    33. Bellak, Christian & Cantwell, John, 1995. "Measuring the Importance of International Production: The Re-estimation of Foreign Direct Investment at Current Values," Department of Economics Working Paper Series 30, WU Vienna University of Economics and Business.
    34. Robert M. Solow, 1956. "A Contribution to the Theory of Economic Growth," The Quarterly Journal of Economics, Oxford University Press, vol. 70(1), pages 65-94.
    35. Puga, Diego, 1999. "The rise and fall of regional inequalities," European Economic Review, Elsevier, vol. 43(2), pages 303-334, February.
    36. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    37. Wehinger, Gert D., 1997. "Exchange rate-based stabilization. Pleasant monetary dynamics?," Department of Economics Working Paper Series 50, WU Vienna University of Economics and Business.
    38. Thomas Grandner, 1998. "Market Shares of Price Setting Firms and Trade Unions," Department of Economics Working Papers wuwp061, Vienna University of Economics and Business, Department of Economics.
    39. Baldwin, Richard E., 1999. "Agglomeration and endogenous capital," European Economic Review, Elsevier, vol. 43(2), pages 253-280, February.
    40. Blanchard, Olivier J, 1985. "Debt, Deficits, and Finite Horizons," Journal of Political Economy, University of Chicago Press, vol. 93(2), pages 223-247, April.
    41. repec:hhs:iuiwop:430 is not listed on IDEAS
    42. Martin, Philippe & I.P. Ottaviano, Gianmarco, 1999. "Growing locations: Industry location in a model of endogenous growth," European Economic Review, Elsevier, vol. 43(2), pages 281-302, February.
    43. Heise, Arne, 2000. "Theorie optimaler Lohnräume. Zur Lohnpolitik in der Europäischen Währungsunion," Department of Economics Working Paper Series 73, WU Vienna University of Economics and Business.
    44. Arne Heise, 2000. "Postkeynesianische Beschäftigungstheorie. Einige Prinzipielle Überlegungen," Department of Economics Working Papers wuwp072, Vienna University of Economics and Business, Department of Economics.
    45. Dieter Gstach, 2003. "A Statistical Framework for Estimating Output-Specific Efficiencies," Department of Economics Working Papers wuwp083, Vienna University of Economics and Business, Department of Economics.
    46. Marterbauer, Markus, 1991. "Die Rolle der Fiskalpolitik im schwedischen Wohlfahrtsstaat," Department of Economics Working Paper Series 6, WU Vienna University of Economics and Business.
    47. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
    48. Futagami, Koichi & Nakajima, Tetsuya, 2001. "Population Aging and Economic Growth," Journal of Macroeconomics, Elsevier, vol. 23(1), pages 31-44, January.
    49. Ragacs, Christian, 1993. "Employment, productivity, output and minimum wage in Austria: a time series analysis," Department of Economics Working Paper Series 21, WU Vienna University of Economics and Business.
    50. Pichler, Eva, 1991. "Cost-Sharing of General and Specific Training with Depreciation of Human Capital," Department of Economics Working Paper Series 7, WU Vienna University of Economics and Business.
    51. Gstach, Dieter & Somers, Andrew & Warning, Susanne, 2003. "Output specific efficiencies. The case of UK private secondary schools," Department of Economics Working Paper Series 84, WU Vienna University of Economics and Business.
    52. Grandner, Thomas, 1996. "Is wage-leadership an instrument to coordinate unions' wage-policy? The case of imperfect product markets," Department of Economics Working Paper Series 42, WU Vienna University of Economics and Business.
    53. Harald Katzmair, 1999. "Der Modellbegriff in den Sozialwissenschaften. Zum Programm einer kritischen Soziologik," Department of Economics Working Papers wuwp064, Vienna University of Economics and Business, Department of Economics.
    54. Klausinger, Hansjörg, 2002. "Walras' Law in stochastic macro models. The example of the optimal monetary instrument," Department of Economics Working Paper Series 82, WU Vienna University of Economics and Business.
    55. Grandner, Thomas, 2000. "Optimal contracts for vertically connected, unionized duopolies," Department of Economics Working Paper Series 71, WU Vienna University of Economics and Business.
    56. Klausinger, Hansjörg, 1995. "Pigou's Macroeconomics of Unemployment (1933): A Simple Model," Department of Economics Working Paper Series 31, WU Vienna University of Economics and Business.
    57. Nowotny, Ewald, 1991. "The Austrian Social Partnership and Democracy," Department of Economics Working Paper Series 10, WU Vienna University of Economics and Business.
    58. repec:kap:iaecre:v:10:y:2004:i:4:p:257-264 is not listed on IDEAS
    59. Dieter Gstach & Andrew Somers & Susanne Warning, 2003. "Output specific efficiencies: The case of UK private secondary schools," Department of Economics Working Papers wuwp084, Vienna University of Economics and Business, Department of Economics.
    60. Ragacs, Christian, 2002. "Minimum wages, human capital, employment and growth," Department of Economics Working Paper Series 81, WU Vienna University of Economics and Business.
    61. Heise, Arne, 2001. "Das Konzept einer nachhaltigen Finanzpolitik aus heterodoxer Sicht. Ein Diskussionsbeitrag," Department of Economics Working Paper Series 76, WU Vienna University of Economics and Business.
    62. Gstach, Dieter, 1998. "Technical efficiency in noisy multi-output settings," Department of Economics Working Paper Series 59, WU Vienna University of Economics and Business.
    63. Grandner, Thomas, 2007. "Product differentiation in a linear city and wage bargaining," Department of Economics Working Paper Series 109, WU Vienna University of Economics and Business.
    64. Gert Wehinger, 1997. "Are Exchange Rate-Based Stabilizations Expansionary: Theoretical Considerations and the Brazilian Case," Department of Economics Working Papers wuwp051, Vienna University of Economics and Business, Department of Economics.
    65. Thomas Grandner, 2000. "A Note on Unionized Firms' Incentive to Integrate Vertically," Department of Economics Working Papers wuwp070, Vienna University of Economics and Business, Department of Economics.
    66. Menahem E. Yaari, 1965. "Uncertain Lifetime, Life Insurance, and the Theory of the Consumer," Review of Economic Studies, Oxford University Press, vol. 32(2), pages 137-150.
    67. Ragacs, Christian & Zagler, Martin, 1997. "Economic policy in a model of endogenous growth," Department of Economics Working Paper Series 53, WU Vienna University of Economics and Business.
    68. Stiassny, Alfred & Koren, Stephan, 1992. "The Temporal Causality between Government Taxes and Spending," Department of Economics Working Paper Series 14, WU Vienna University of Economics and Business.
    69. Leopold Soegner, 1998. "Regulation of a Complementary Imputed Good in a Competitive Environment," Department of Economics Working Papers wuwp056, Vienna University of Economics and Business, Department of Economics.
    70. Gustav Feichtinger & Alexia Prskawetz & Fernando Riosmena & Inga Freund & Maria Winkler-Dworak, 2007. "On the age dynamics of learned societies - taking the example of the Austrian Academy Sciences," Vienna Yearbook of Population Research, Vienna Institute of Demography (VID) of the Austrian Academy of Sciences in Vienna, vol. 5(1), pages 107-131.
    71. Klausinger, Hansjörg, 1993. "Die Klassische Ökonomie und die Keynessche Alternative. Revision eines Mythos?," Department of Economics Working Paper Series 25, WU Vienna University of Economics and Business.
    72. Bellak, Christian, 1992. "Towards A Flexible Concept of Competitiveness," Department of Economics Working Paper Series 13, WU Vienna University of Economics and Business.
    73. Hamberger, Klaus & Katzmair, Harald, 1995. "Arithmetische Politik und ökonomische Moral. Zur Genealogie der Sozialwissenschaften in England," Department of Economics Working Paper Series 33, WU Vienna University of Economics and Business.
    74. Thomas Grandner, 2000. "Optimal Contracts for Vertically Connected, Unionized Duopolies," Department of Economics Working Papers wuwp071, Vienna University of Economics and Business, Department of Economics.
    75. Ragacs, Christian, 1993. "Minimum Wages in Austria: Estimation of Employment Functions," Department of Economics Working Paper Series 20, WU Vienna University of Economics and Business.
    76. Maarten Bosker & Harry Garretsen, 2007. "Trade Costs, Market Access and Economic Geography: Why the Empirical Specification of Trade Costs Matters," CESifo Working Paper Series 2071, CESifo Group Munich.
    77. Richard Baldwin & Rikard Forslid & Philippe Martin & Gianmarco Ottaviano & Frederic Robert-Nicoud, 2005. "Economic Geography and Public Policy," Economics Books, Princeton University Press, edition 1, number 7524.
    78. Thomas Grandner, 1997. "Territoriale Evolution von Kooperation in einem Gefangenendilemma," Department of Economics Working Papers wuwp045, Vienna University of Economics and Business, Department of Economics.
    79. Hansjoerg Klausinger, 1997. "Die Alternativen zur Deflationspolitik Brünings im Lichte zeitgenössischer Kritik," Department of Economics Working Papers wuwp049, Vienna University of Economics and Business, Department of Economics.
    80. Dockner Engelbert J. & Van Long Ngo, 1993. "International Pollution Control: Cooperative versus Noncooperative Strategies," Journal of Environmental Economics and Management, Elsevier, vol. 25(1), pages 13-29, July.
    81. Altzinger, Wilfried, 1995. "Beschäftigungseffekte des österreichischen Osthandels. 1989 - 1994," Department of Economics Working Paper Series 34, WU Vienna University of Economics and Business.
    82. Biehl, Kai & Fent, Thomas, 2007. "Vorausschätzungen für die Entwicklung der Gesamtbevölkerung und der Beschäftigung in Österreich bis 2035
      [Projections of the Development of Population and Employment in Austria until 2035]
      ," MPRA Paper 2877, University Library of Munich, Germany.
    83. Gstach, Dieter, 1996. "A new approach to stochastic frontier estimation: DEA+," Department of Economics Working Paper Series 39, WU Vienna University of Economics and Business.
    84. Miguel-Angel Martín & Agustín Herranz, 2004. "Human capital and economic growth in Spanish regions," International Advances in Economic Research, Springer;International Atlantic Economic Society, vol. 10(4), pages 257-264, November.
    85. Wilfried Altzinger, 1996. "Beschäftigungseffekte des österreichischen Osthandels," Department of Economics Working Papers wuwp034, Vienna University of Economics and Business, Department of Economics.
    86. Grandner, Thomas, 1998. "Market shares of price setting firms and trade unions," Department of Economics Working Paper Series 61, WU Vienna University of Economics and Business.
    87. Martin Zagler, 1996. "Long-Run Monetary Non-Neutrality in a Model of Endogenous Growth," Department of Economics Working Papers wuwp037, Vienna University of Economics and Business, Department of Economics.
    88. repec:dgr:rugccs:200502 is not listed on IDEAS
    89. Engelbert Stockhammer, 2000. "Explaining European Unemployment: Testing the NAIRU Theory and a Keynesian Approach," Department of Economics Working Papers wuwp068, Vienna University of Economics and Business, Department of Economics.
    90. Katzmair, Harald, 1999. "Der Modellbegriff in den Sozialwissenschaften. Zum Programm einer kritischen Sozio-Logik," Department of Economics Working Paper Series 64, WU Vienna University of Economics and Business.
    91. Gerhard Munduch & Alexander Pfister & Leopold Sögner & Alfred Stiassny, 2002. "Estimating Marginal Costs for the Austrian Railway System," Department of Economics Working Papers wuwp078, Vienna University of Economics and Business, Department of Economics.
    92. Dieter Gstach, 1998. "Small Sample Performance of Two Approaches to Technical Efficiency Estimation with Multiple Outputs," Department of Economics Working Papers wuwp058, Vienna University of Economics and Business, Department of Economics.
    93. Gstach, Dieter, 1993. "Scale Efficiency: Where Data Envelopment Analysis Outperforms Stochastic Production Function Estimation," Department of Economics Working Paper Series 23, WU Vienna University of Economics and Business.
    94. Bellak, Christian, 1999. "Explaining foreign ownership by comparative and competitive advantage. Empirical evidence," Department of Economics Working Paper Series 62, WU Vienna University of Economics and Business.
    95. Dieter Gstach & Thomas Grandner, 1998. "Restricted Immigration in a Two-Sector Economy," Department of Economics Working Papers wuwp055, Vienna University of Economics and Business, Department of Economics.
    96. Scharmer, Felicitas, 1993. "The Validity Issue in Applied General Equilibrium Tax Models," Department of Economics Working Paper Series 19, WU Vienna University of Economics and Business.
    97. Heijdra, Ben J., 2017. "Foundations of Modern Macroeconomics," OUP Catalogue, Oxford University Press, edition 3, number 9780198784135.
    98. Belinda Diaz & Thomas Fent & Alexia Prskawetz & Laura Bernardi, 2011. "Transition to Parenthood: The Role of Social Interaction and Endogenous Networks," Demography, Springer;Population Association of America (PAA), vol. 48(2), pages 559-579, May.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Grafeneder-Weissteiner, Theresa & Prettner, Klaus, 2010. "Agglomeration processes in aging societies," Department of Economics Working Paper Series 131, WU Vienna University of Economics and Business.
    2. Theresa Grafeneder-Weissteiner, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Papers wuwp132, Vienna University of Economics and Business, Department of Economics.
    3. Stefan Wrzaczek, 2014. "Social optimality in the constructed-capital model," Central European Journal of Operations Research, Springer;Slovak Society for Operations Research;Hungarian Operational Research Society;Czech Society for Operations Research;Österr. Gesellschaft für Operations Research (ÖGOR);Slovenian Society Informatika - Section for Operational Research;Croatian Operational Research Society, vol. 22(1), pages 211-232, March.
    4. Grafeneder-Weissteiner, Theresa, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Paper Series 132, WU Vienna University of Economics and Business.
    5. Theresa Grafeneder-Weissteiner, 2011. "The joint effect of demographic change on growth and agglomeration," ERSA conference papers ersa10p834, European Regional Science Association.

    More about this item

    Keywords

    Agglomeration; New Economic Geography; Trade and Growth; Constructed Capital Model; Population Ageing.;

    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:vid:wpaper:0901. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Frank Kolesnik) The email address of this maintainer does not seem to be valid anymore. Please ask Frank Kolesnik to update the entry or send us the correct email address. General contact details of provider: http://www.oeaw.ac.at/vid/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.