Spatial Development

47 Pages Posted: 21 Apr 2010

See all articles by Klaus Desmet

Klaus Desmet

Southern Methodist University (SMU); Centre for Economic Policy Research (CEPR)

Esteban Rossi-Hansberg

Princeton University - Department of Economics; National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: April 21, 2010

Abstract

We present a theory of spatial development. A continuum of locations in a geographic area choose each period how much to innovate (if at all) in manufacturing and services. Locations can trade subject to transport costs and technology diffuses spatially across locations. The result is an endogenous growth theory that can shed light on the link between the evolution of economic activity over time and space. We apply the model to study the evolution of the U.S. economy in the last few decades and find that the model can generate the reduction in the employment share in manufacturing, the increase in service productivity in the second part of the 1990s, the increase in land rents in the same period, as well as several other spatial and temporal patterns.

Keywords: Dynamic Spatial Models, Growth, Innovation, Land Rent Evolution, Structural Transformation, Technology Diffusion, Trade

JEL Classification: E32, O11, O18, O33, R12

Suggested Citation

Desmet, Klaus and Rossi-Hansberg, Esteban Alejandro, Spatial Development (April 21, 2010). FEEM Working Paper No. 26.2010. Available at SSRN: https://ssrn.com/abstract=1593486 or http://dx.doi.org/10.2139/ssrn.1593486

Klaus Desmet (Contact Author)

Southern Methodist University (SMU) ( email )

6212 Bishop Blvd.
Dallas, TX 75275
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Esteban Alejandro Rossi-Hansberg

Princeton University - Department of Economics ( email )

Princeton, NJ
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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