A Theoretical Framework for Evolutionary Economic Geography: Industrial Dynamics and Urban Growth as a Branching Process

Posted: 7 Jul 2008

See all articles by Koen Frenken

Koen Frenken

University of Utrecht - Urban and Regional Research Centre Utrecht (URU)

Ron A. Boschma

Utrecht University - Faculty of Geographical Sciences

Date Written: September 2007

Abstract

We propose a framework that specifies the process of economic development as an evolutionary branching process of product innovations. Each product innovation provides a growth opportunity for an existing firm or a new firm, and for an existing city or a new city. One can then obtain both firm size and city size distributions as two aggregates resulting from a single evolutionary process. Gains from variety at the firm level (economies of scope) and the urban level (Jacobs externalities) provide the central feedback mechanism in economic development generating strong path dependencies in the spatial concentration of industries and the specialization of cities. Gains from size are also expected, yet these are ultimately bounded by increasing wages. The contribution of our framework lies in providing a micro-foundation of economic geography in terms of the interplay between industrial dynamics and urban growth. The framework is sufficiently general to investigate systematically a number of stylized facts in economic geography, while at the same time it is sufficiently flexible to be extended such as to become applicable in more specific micro-contexts. A number of extensions related to the concepts of knowledge spillover and lock-in, are also discussed.

Keywords: evolutionary economic geography, urban growth, firm growth, Zipf, branching, innovation, B25, B52, L11, L25, R0, R1, R12

Suggested Citation

Frenken, Koen and Boschma, Ron A., A Theoretical Framework for Evolutionary Economic Geography: Industrial Dynamics and Urban Growth as a Branching Process (September 2007). Journal of Economic Geography, Vol. 7, No. 5, pp. 635-649, 2007, Available at SSRN: https://ssrn.com/abstract=1155699 or http://dx.doi.org/10.1093/jeg/lbm018

Koen Frenken (Contact Author)

University of Utrecht - Urban and Regional Research Centre Utrecht (URU) ( email )

Vredenburg 138
Utrecht, 3511 BG
Netherlands

HOME PAGE: http://econ.geo.uu.nl/frenken/frenken.html

Ron A. Boschma

Utrecht University - Faculty of Geographical Sciences ( email )

Postbus 80.115
3508 TC Utrecht
Netherlands
+31 30 2532896 (Phone)
+31 30 2532037 (Fax)

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