Growth and Agglomeration

Philippe Martin and Gianmarco Ottaviano

No 1529, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper presents a model in which growth and geographic agglomeration of economic activities are mutually self reinforcing processes. Industrial agglomeration in one location spurs growth because it reduces the cost of innovation in that location through a pecuniary externality due to transaction costs. Growth fosters agglomeration because as the sector at the origin of innovation expands, new firms tend to locate close to this sector. The model can be interpreted as illustrating one mechanism behind the emergence of cities seen as centres for production and innovation, and is consistent with the episodes of simultaneous increases in growth rates and spatial agglomeration.

Keywords: Agglomeration; Cities; Endogenous Growth; Technological Progress (search for similar items in EconPapers)
JEL-codes: O31 R11 R12 (search for similar items in EconPapers)
Date: 1996-11
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Citations: View citations in EconPapers (40)

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Related works:
Journal Article: Growth and Agglomeration (2001)
Working Paper: Growth and Agglomeration (2001)
Working Paper: Growth and Agglomeration (2001)
Working Paper: Growth and Agglomeration (2001)
Working Paper: Growth and Agglomeration (1996)
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