Growing Locations: Industry Location in a Model of Endogenous Growth

CEPR Discussion Paper Series No. 1523

Posted: 17 Mar 1997

See all articles by Gianmarco I.P. Ottaviano

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation

Philippe Martin

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS); Centre for Economic Policy Research (CEPR)

Date Written: November 1996

Abstract

This paper constructs a model of endogenous growth and endogenous industry location where the two interact. We show that with global spillovers in R & D, a high growth rate and a high level of transaction costs are associated with relocation of the newly created firms to the South (the location with a low initial human capital). With local spillovers in R & D, this activity will be agglomerated in the North, and the rate of innovation will increase with the concentration of firms in the North. This in turn implies that a decrease of transaction costs through, for example, trade integration, will increase the growth rate because it leads to a higher industrial concentration of firms where the R & D is located. We show that industrial concentration improves welfare only for low enough transaction costs and high enough spillovers.

JEL Classification: F43, O30, R12

Suggested Citation

Ottaviano, Gianmarco I.P. and Martin, Philippe, Growing Locations: Industry Location in a Model of Endogenous Growth (November 1996). CEPR Discussion Paper Series No. 1523. Available at SSRN: https://ssrn.com/abstract=3809

Gianmarco I.P. Ottaviano

Bocconi University - Department of Economics and Paolo Baffi Centre on Central Banking and Financial Regulation ( email )

Via Gobbi 5
Milan, 20136
Italy

Philippe Martin (Contact Author)

Ecole Nationale des Ponts et Chaussées (ENPC) - Centre d'Enseignement et de Recherche en Analyse Socio-Economique (CERAS) ( email )

28, rue des Saints-Peres
75007 Paris
France
+33 1 4313 6385 (Phone)
+33 1 4313 6382 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

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