Kiel Working Papers, Kiel Institute for World Economics
No 1465:
Governmental activity, integration, and agglomeration
Ingrid Ott and Susanne Soretz
Abstract: This paper analyzes, within a regional growth model, the
impact of productive governmental policy and integration on the spatial
distribution of economic activity. Integration is understood as enhancing
territorial cooperation between the regions, and it describes the extent to
which one region may benefit from the other region's public input, e.g. the
extent to which regional road networks are connected. Both integration and
the characteristics of the public input crucially affect whether
agglomeration arises and if so to which extent economic activity is
concentrated: As a consequence of enhanced integration, agglomeration is
less likely to arise and concentration will be lower. Relative congestion
reinforces agglomeration, thereby increasing equilibrium concentration. Due
to the congestion externalities, the market outcome ends up in suboptimally
high concentration
Keywords: public inputs; agglomeration; integration; (follow links to similar papers)
JEL-Codes: O33,; Z13; (follow links to similar papers)
33 pages, November 2008
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