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Demographic change, growth and agglomeration

  • Theresa Grafeneder-Weissteiner

    ()

    (Department of Economics, Vienna University of Economics & B.A.)

This article presents a framework within which the effects of demographic change on both agglomeration and growth of economic activities can be analyzed. I introduce an overlapping generation structure into a New Economic Geography model with endogenous growth due to learning spillovers and focus on the effects of demographic structures on long-run equilibrium outcomes and stability properties. First, life-time uncertainty is shown to decrease long-run economic growth perspectives. In doing so, it also mitigates the pro-growth effects of agglomeration resulting from the localized nature of learning externalities. Second, the turnover of generations acts as a dispersion force whose anti-agglomerative effects are, however, dampened by the growth-linked circular causality being present as long as interregional knowledge spillovers are not perfect. Finally, lifetime uncertainty also reduces the possibility that agglomeration is the result of a self-fulfilling prophecy.

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Paper provided by Vienna University of Economics and Business, Department of Economics in its series Department of Economics Working Papers with number wuwp132.

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Date of creation: Jun 2010
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Handle: RePEc:wiw:wiwwuw:wuwp132
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