The Core-Periphery Model and Endogenous Growth

Richard Baldwin and Rikard Forslid

No 1749, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: This paper presents a model in which long-run growth and industrial location are jointly endogenous. Specifically, it introduces Romer-Grossman-Helpman endogenous growth into Krugman’s core-periphery model with footloose labour. The paper focuses on stability of the symmetric equilibrium, showing that growth is a powerful destabilising force. For instance, even with prohibitive trade barriers, the symmetric equilibrium is unstable as long as workers’ discount rates are not too high. It also shows that inter-regional learning spillovers are a stabilizing force. Finally, the paper shows that agglomeration of industry is favourable to growth in both regions, so positive growth effects might offset the well-known static welfare loss that the periphery experiences when the core-periphery outcome occurs.

Keywords: Economic Geography; Endogenous Growth (search for similar items in EconPapers)
JEL-codes: F10 F12 F15 F20 O40 O41 (search for similar items in EconPapers)
Date: 1997-11
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Citations: View citations in EconPapers (43)

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