Premium
Equilibrium and Economic Growth: Spatial Econometric Models and Simulations
Author(s) -
Fingleton Bernard
Publication year - 2001
Publication title -
journal of regional science
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.171
H-Index - 79
eISSN - 1467-9787
pISSN - 0022-4146
DOI - 10.1111/0022-4146.00210
Subject(s) - economics , productivity , endogenous growth theory , returns to scale , computable general equilibrium , fujita scale , growth theory , capital (architecture) , inequality , econometrics , economic geography , european union , technological change , growth model , contrast (vision) , macroeconomics , human capital , production (economics) , international trade , neoclassical economics , mathematics , economic growth , geography , mathematical analysis , archaeology , artificial intelligence , meteorology , computer science
Neoclassical theory assumes diminishing returns to capital and spatially constant exogenously‐determined technological progress, although it is questionable whether these are realistic assumptions for modeling manufacturing productivity growth variations across European Union (E.U.) regions. In contrast, the model developed in this paper assumes increasing returns and spatially varying technical progress, and is linked to endogenous growth theory and particularly to ‘new economic geography’ theory. Simulations, involving 178 E.U.regions, show that productivity levels and growth rates are higher in all E.U. regions when the financially assisted (Objective 1) regions have faster output growth. This also reduces inequalities in levels of technology. Allowing the core regions to grow faster has a similar effect of raising productivity growth rates across the E.U., although inequality increases. Thus, the simulations are seen as an attempt to develop a type of ‘computable geographical equilibrium’ model which, as suggested by Fujita, Krugman, and Venables (1999), is the way theoretical economic geography needs to evolve in order to become a predictive discipline.