Is agglomeration really good for growth? Global efficiency, interregional equity and uneven growth

• DOI: 10.1016/j.jue.2014.08.006
• Publication Date: 2014-09-16T06:53:03Z
• Authors: Fabio Cerina; Francesco Mureddu
• Keywords: Equity

Abstract According to NEG literature, spatial concentration of industrial activities increases growth at the regional and aggregate level without generating regional growth differentials. This view is not supported by the data. We extend the canonical model with an additional sector producing non-tradable goods which benefits from localized knowledge spillovers coming from the RD (2) agglomeration may have a negative effect on the growth rate of real income, both at the regional and at the aggregate level. Our conclusions have relevant policy implications: contrary to the standard view, current EU and US regional policies favouring industrial dispersion might be welfare-improving both at the regional and the aggregate level and may reduce regional income disparities.