Geography, Growth and Inequalities: Market Failures and Public Policy Implications

Benjamin Montmartin

No 2022-03, GREDEG Working Papers from Groupe de REcherche en Droit, Economie, Gestion (GREDEG CNRS), Université Côte d'Azur, France

Abstract: We propose a unique market and social planner solution for a generalized new economic geography and growth model that highlights the importance of taking into account the existence of agglomeration externalities in the analysis of market failures and public policies. Our model disentangles the underinvestment in R&D and the suboptimal growth link present in the previous endogenous growth model. Consequently, our framework allows the market economy to reach various steady-state situations. By evaluating the effects of two strategic policies implemented in the European Union, namely, an innovation and a cohesion policy, we highlight that the complementarity or substitutability of these policies to bring the economy closer to its optimum is directly related to the hypothesis made on the link between agglomeration and growth.

Keywords: Agglomeration; growth; spatial income inequality; innovation and cohesion policies (search for similar items in EconPapers)
JEL-codes: F43 H50 R12 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2022-01
New Economics Papers: this item is included in nep-geo, nep-ino, nep-sbm, nep-tid and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:gre:wpaper:2022-03

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