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Structural Change, Urban Congestion, and the End of Growth

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  • Grossmann, Volker

Abstract

This paper develops a two-sector R&D-based growth model with congestion effects from increasing urban population density. We show that endogenous technologicalprogress causes structural change if there are positive productivity spillovers from the modern to the traditional sector and Engel’s law holds. In turn, urban congestion effects cause a productivity slowdown in the modern sector. Eventually, economic growth may cease in the long-run. We also show that land dilution from a higher workforce may give rise to negative scale effects on GDP per capita. Finally, we investigate how the optimal land allocation depends on the strength of urban congestion effects.

Suggested Citation

  • Grossmann, Volker, 2011. "Structural Change, Urban Congestion, and the End of Growth," Annual Conference 2011 (Frankfurt, Main): The Order of the World Economy - Lessons from the Crisis 48712, Verein für Socialpolitik / German Economic Association.
  • Handle: RePEc:zbw:vfsc11:48712
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    References listed on IDEAS

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    1. Piyabha Kongsamut & Sergio Rebelo & Danyang Xie, 2001. "Beyond Balanced Growth," Review of Economic Studies, Oxford University Press, vol. 68(4), pages 869-882.
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    4. repec:hoo:wpaper:e-92-3 is not listed on IDEAS
    5. L. Rachel Ngai & Christopher A. Pissarides, 2007. "Structural Change in a Multisector Model of Growth," American Economic Review, American Economic Association, vol. 97(1), pages 429-443, March.
    6. Steger, Thomas M., 2000. "Economic growth with subsistence consumption," Journal of Development Economics, Elsevier, vol. 62(2), pages 343-361, August.
    7. Daron Acemoglu & Veronica Guerrieri, 2008. "Capital Deepening and Nonbalanced Economic Growth," Journal of Political Economy, University of Chicago Press, vol. 116(3), pages 467-498, June.
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    10. Timo Boppart, 2010. "Engel's Law and Growth with Directed Technical Change," DEGIT Conference Papers c015_017, DEGIT, Dynamics, Economic Growth, and International Trade.
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    14. Holger Strulik, 2005. "The Role of Human Capital and Population Growth in R&D-based Models of Economic Growth," Review of International Economics, Wiley Blackwell, vol. 13(1), pages 129-145, February.
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    Cited by:

    1. Klarl, Torben Alexander, 2015. "Urban-rural migration and congestion costs revisited: is there a triple dividend for cities in developing countries?," Annual Conference 2015 (Muenster): Economic Development - Theory and Policy 112829, Verein für Socialpolitik / German Economic Association.

    More about this item

    Keywords

    Congestion; Endogenous growth; Engel’s law; Structural change; Urbanization;

    JEL classification:

    • O10 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - General
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General

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