Spatial aspects of economic growth. Review of theoretical literature

Tomasz Brodzicki

No 1404, Working Papers from Instytut Rozwoju, Institute for Development

Abstract: This paper addresses the spatial aspects of economic growth at regional level. We review the theoretical and empirical literature on economic growth and new economic geography (NEG) paying particular attention to dynamic NEG models. Both economic growth and location of economic activity are endogenous. Complex interdependencies exist between them and they are only to a limited extent included in the current theoretical models. A review of the literature leads to the conclusion on the existence of a negative relationship between the rate of economic growth at the national level and the degree of differentiation at regional level. Thus, equalization-oriented policy aimed at equilibrating development opportunities may lead to a general slowdown. Emerging theoretical models a la Melitz in the heterogeneous firms models take into account the stochastic distribution of productivity at the firm level lead to interesting conclusions, but at the same time lose clarity and explicitness of generated recommendations. The ideal theoretical model adapted to Polish conditions should be of a dynamic and multi-sector, multi-regional type with core-periphery setup - allowing for hierarchical policentricity and endogenous economic growth (broadly defined capital accumulation), allowing for the flow of goods and factors of production, taking into account imperfect diffusion of knowledge (localized diffusion) . The ultimate version of the model should envisaged random variation in productivity of firms and consumer preferences. At the same time it would not eliminate the problem of the black-boxes. Due to the complexity of the model does not exist, what is more, it is unlikely to be created in the future. In all likelihood, the model would not lead to clear policy conclusions. Its usefulness from the perspective of regional policy would be thus very limited.

Keywords: economic growth; new economic geography; regional development (search for similar items in EconPapers)
JEL-codes: O40 O43 R11 R12 (search for similar items in EconPapers)
Pages: 42 pages
Date: 2014-12
New Economics Papers: this item is included in nep-geo, nep-gro and nep-ure
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http://www.instytut-rozwoju.org/WP/IR_WP2014_04.pdf First version, 2014

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Persistent link: https://EconPapers.repec.org/RePEc:iro:wpaper:1404

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