Working papers, Department of Economics, WU (Wirtschaftsuniversität Wien)
Demographic change, growth and agglomeration
Abstract: This article presents a framework within which the effects
of demographic change on both agglomeration and growth of economic
activities can be analyzed. I introduce an overlapping generation structure
into a New Economic Geography model with endogenous growth due to learning
spillovers and focus on the effects of demographic structures on long-run
equilibrium outcomes and stability properties. First, life-time uncertainty
is shown to decrease long-run economic growth perspectives. In doing so, it
also mitigates the pro-growth effects of agglomeration resulting from the
localized nature of learning externalities. Second, the turnover of
generations acts as a dispersion force whose anti-agglomerative effects
are, however, dampened by the growth-linked circular causality being
present as long as interregional knowledge spillovers are not perfect.
Finally, lifetime uncertainty also reduces the possibility that
agglomeration is the result of a self-fulfilling prophecy.
JEL-Codes: F43; O33; J10; R11; (follow links to similar papers)
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Design Joakim Ekebom