Is agglomeration really good for growth? Global efficiency,interregional equity and uneven growth |
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| Institution: | 1. University of Cagliari and CRENoS, Italy;2. Open University of Catalonia, Spain and CRENoS, Italy;1. Institute of Economic Research, Kyoto University and Research Institute of Economy, Trade and Industry (RIETI), Japan;2. Department of Electrical and Systems Engineering, University of Pennsylvania, United States;1. Department of Finance, School of Economics, Fujian Normal University, Fuzhou, Fujian, 350117, PR China;2. School of Management, China Institute for Studies in Energy Policy, Collaborative Innovation Center for Energy Economics and Energy Policy, Xiamen University, Xiamen, Fujian 361005, PR China;1. Department of Economics, Umeå School of Business and Economics, Umeå University, SE 901 87 Umeå, Sweden;2. Department of Law, University of Milan, 20122 Milan, Italy;3. Uppsala Center for Fiscal Studies (UCFS), Uppsala University, SE 753 13 Uppsala, Sweden;1. Università di Cagliari, Dipartimento di Scienze Economiche ed Aziendali and CRENoS, Viale Fra Ignazio 78, 09123, Cagliari, Italy;2. Università di Sassari, DISEA and CRENoS, Via Muroni 21, 07100, Sassari, Italy |
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| Abstract: | According to NEG literature, spatial concentration of industrial activities increases growth at the regional and aggregate level without generating regional growth differentials. This view is not supported by the data. We extend the canonical model with an additional sector producing non-tradable goods which benefits from localized knowledge spillovers coming from the R&D performing industrial sector. This view, motivated by the evidence, generates both an anti-growth and a pro-growth effect of agglomeration for both the deindustrializing and the industrializing regions and leads to two novel results: (1) when agglomeration takes place, growth is lower in the periphery; (2) agglomeration may have a negative effect on the growth rate of real income, both at the regional and at the aggregate level. Our conclusions have relevant policy implications: contrary to the standard view, current EU and US regional policies favouring industrial dispersion might be welfare-improving both at the regional and the aggregate level and may reduce regional income disparities. |
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| Keywords: | Agglomeration Aggregate real growth Regional real growth Interregional equity Non-tradables Localized knowledge spillovers |
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