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The Core–Periphery Model and Endogenous Growth: Stabilizing and Destabilizing Integration
Author(s) -
Baldwin Richard E,
Forslid Rikard
Publication year - 2000
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/1468-0335.00211
Subject(s) - economies of agglomeration , endogenous growth theory , economics , growth model , welfare , core (optical fiber) , centripetal force , product (mathematics) , economic integration , international economics , microeconomics , market economy , human capital , physics , geometry , mathematics , mechanics , materials science , composite material
We present a model where long‐run growth and industrial location are jointlyendogenous by introducing Romerian product innovation growth into Krugman'score–periphery model. We focus on stability, showing that growth is apowerful centripetal force, but that knowledge spillovers are a powerfulcentrifugal force. Integration policies that lower the cost of tradingideas are shown to encourage dispersion of economic activity while thosethat lower the cost of trading goods encourage agglomeration. Agglomerationis shown to be favourable to growth in both regions. The pro‐growth effectsmitigate the periphery's static welfare loss from agglomeration.