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Demographic change, growth and agglomeration

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  • Grafeneder-Weissteiner, Theresa

Abstract

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. (author's abstract)

Suggested Citation

  • Grafeneder-Weissteiner, Theresa, 2010. "Demographic change, growth and agglomeration," Department of Economics Working Paper Series 902, WU Vienna University of Economics and Business.
  • Handle: RePEc:wiw:wus005:902
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