Cerina, Fabio - Mureddu, Francesco (2008) Agglomeration and growth with endogenous expenditure shares. Working Paper. CRENoS, Cagliari.
Official URL: http://crenos.unica.it/crenos/files/WP%2008-20%20d...
We develop a New Economic Geography and Growth model which, by using a CES utility function in the second-stage optimization problem, allows for expenditure shares in industrial goods to be endogenously de- termined. The implications of our generalization are quite relevant. In particular, we obtain the following novel results: 1) catastrophic agglom- eration may always take place, whatever the degree of market integration, provided that the traditional and the industrial goods are su¢ ciently good substitutes; 2) the regional rate of growth is a¤ected by the interregional allocation of economic activities even in the absence of localized spillovers, so that geography always matters for growth and 3) the regional rate of growth is a¤ected by the degree of market openness: in particular, depend- ing on whether the traditional and the industrial goods are good or poor substitutes, economic integration may be respectively growth-enhancing or growth-detrimental.
|Item Type:||Technical Report / Working Paper / Project Report (Working Paper)|
|Institution:||Universita' degli Studi di Cagliari|
|Divisions:||Centri > CRENoS Centro Ricerche Economiche Nord Sud|
|Subjects:||Area 13 - Scienze economiche e statistiche > SECS-P/01 Economia politica|
|Uncontrolled Keywords:||new economic geography; endogenous expenditure shares; substitution effect|
|Deposited On:||03 Nov 2009 15:29|
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