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Agglomeration and growth: the effects of commuting costs

Antonio Accetturo ()

No 688, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: We present a model of industrial location and endogenous growth with congestion costs. According to the interplay between knowledge spillovers and commuting costs, we are able to obtain both a Krugman-type and a bell-shaped agglomeration outcome. In the first case, the economy experiences a permanent income inequality in the steady state and income divergence in the transitional dynamics. In the second case, we observe an enlargement of the industrial core of the economy with a strong catching up by the periphery. Welfare analysis shows that congestion create (in the bell-shaped agglomeration case) a negative welfare effect on peripheral unskilled workers and renders the agglomerated equilibrium Pareto inferior to dispersion.

Keywords: Congestion; Endogenous Growth; Migration (search for similar items in EconPapers)
JEL-codes: R11 O11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-mig and nep-ure
Date: 2008-09
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Journal Article: Agglomeration and growth: The effects of commuting costs (2010) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_688_08

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