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Structural Change and Growth in a NEG Model
Author(s) -
Cerina Fabio,
Mureddu Francesco
Publication year - 2013
Publication title -
review of development economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.531
H-Index - 50
eISSN - 1467-9361
pISSN - 1363-6669
DOI - 10.1111/rode.12026
Subject(s) - economics , economies of agglomeration , homothetic transformation , capital accumulation , capital (architecture) , structural change , growth model , microeconomics , human capital , macroeconomics , market economy , mathematics , archaeology , history , geometry
This paper presents a N ew E conomic G eography model of structural change, agglomeration and growth. Assuming a non‐homothetic preference structure, our results show that a progressive reduction of trade costs allows the economy to pass from a pre‐industrialized to an industrialized stage and then, within the latter, from a dispersed to an urbanized regime. However, the introduction of capital accumulation and the dynamic setting of our model opens the door to a richer set of implications. First, an additional stage is introduced as, for some intermediate values of trade costs, a multiple equilibria regime emerges with simultaneously stable symmetric and core‐periphery equilibria. Second, the introduction of non‐homotheticity introduces a new channel through which growth is affected by trade costs and agglomeration. In particular, integration is always growth‐enhancing while agglomeration is growth‐detrimental.