A theoretical framework for Evolutionary Economic Geography: Industrial dynamics and urban growth as a branching process

Koen Frenken and Ron Boschma ()

No 701, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: We propose a framework that specifies the process of economic development as an evolutionary branching process of product innovations. Each product innovation provides a growth opportunity for an existing firm or a new firm, and for an existing city or a new city. One can then obtain both firm size and city size distributions as two aggregates resulting from a single evolutionary process. Gains from variety at the firm level (economies of scope) and the urban level (Jacobs externalities) provide the central feedback mechanism in economic development generating strong path dependencies in the spatial concentration of industries and the specialisation of cities. Gains from size are also expected, yet these are ultimately bounded by increasing wages. The contribution of our framework lies in providing a micro-foundation of economic geography in terms of the interplay between industrial dynamics and urban growth. The framework is sufficiently general to investigate systematically a number of stylised facts in economic geography, while at the same time it is sufficiently flexible to be extended such as to become applicable in more specific micro-contexts. A number of extensions related to the concepts of knowledge spillover and lock-in, are also discussed.

Keywords: evolutionary economic geography; urban growth; firm growth; Zipf; branching; innovation (search for similar items in EconPapers)
JEL-codes: B25 B52 L11 L25 R0 R1 R12 (search for similar items in EconPapers)
Pages: 15 pages
Date: 2007-03, Revised 2007-03
New Economics Papers: this item is included in nep-evo, nep-geo, nep-ino, nep-tid and nep-ure
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Citations: View citations in EconPapers (229)

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http://econ.geo.uu.nl/peeg/peeg0701.pdf Version March 2007 (application/pdf)

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Journal Article: A theoretical framework for evolutionary economic geography: industrial dynamics and urban growth as a branching process (2007)
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Persistent link: https://EconPapers.repec.org/RePEc:egu:wpaper:0701

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