Demographic change, growth and agglomeration

Theresa Grafeneder-Weissteiner

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: This article presents a framework within which the effects of demographic change on both agglomeration and growth of economic activities can be analyzed. I introduce an overlapping generation structure into a New Economic Geography model with endogenous growth due to learning spillovers and focus on the effects of demographic structures on long-run equilibrium outcomes and stability properties. First, life-time uncertainty is shown to decrease long-run economic growth perspectives. In doing so, it also mitigates the pro-growth effects of agglomeration resulting from the localized nature of learning externalities. Second, the turnover of generations acts as a dispersion force whose anti-agglomerative effects are, however, dampened by the growth-linked circular causality being present as long as interregional knowledge spillovers are not perfect. Finally, lifetime uncertainty also reduces the possibility that agglomeration is the result of a self-fulfilling prophecy.

JEL-codes: F43 J10 O33 R11 (search for similar items in EconPapers)
Date: 2010-06
New Economics Papers: this item is included in nep-age, nep-dge, nep-fdg, nep-opm and nep-ure
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Citations: View citations in EconPapers (1)

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