Is Agglomeration really good for Growth? Global Efficiency, Interregional Equity and Uneven Growth

Fabio Cerina and Francesco Mureddu ()

Working Paper CRENoS from Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia

Abstract: According to NEG literature (Baldwin et al. (2004)), spatial concentration of industrial activities increases growth at the regional and aggregate level without generating regional growth differentials. This view is not supported by the data. We extend the canonical model with an additional sector producing non-tradable goods which benefits from localized knowledge spillovers coming from the R&D performing industrial sector. This view, motivated by the evidence, generates both an anti-growth and a pro-growth effect of agglomeration for both the deindustrializing and the industrializing regions and leads to two novel results - 1) when agglomeration takes place, growth is lower in the periphery; 2) agglomeration may have a negative effect on the growth rate of real income, both at the regional and at the aggregate level. Our conclusions have relevant policy implications - contrary to the standard view, current EU and US regional policies favouring industrial dispersion might be welfare-improving both at the regional and the aggregate level and may reduce regional income disparities.

Keywords: aggregate real growth; agglomeration; regional real growth; non- tradables; localized knowledge spillovers; interregional equity (search for similar items in EconPapers)
JEL-codes: O33 O41 R10 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-fdg, nep-geo, nep-int and nep-ure
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Citations: View citations in EconPapers (7)

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Related works:
Journal Article: Is agglomeration really good for growth? Global efficiency, interregional equity and uneven growth (2014)
Working Paper: Is Agglomeration really Good for Growth? Global Efficiency, Interregional Equity and Uneven Growth (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:cns:cnscwp:200913

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