ON SPATIAL DYNAMICS* |
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| Authors: | Klaus Desmet Esteban Rossi‐Hansberg |
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| Institution: | 1. Universidad Carlos III de Madrid, Department of Economics, Calle Madrid 126, 28903 Getafe, Spain. E‐mail: klaus.desmet@uc3m.es;2. Princeton University, Department of Economics, 309 Fisher Hall, Princeton, NJ 08544. E‐mail: erossi@princeton.edu |
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| Abstract: | ABSTRACT It has long been recognized that the forces that lead to the agglomeration of economic activity and to aggregate growth are similar. Unfortunately, few formal frameworks have been advanced to explore this link. We critically discuss the literature and present a simple framework that can circumvent some of the main obstacles we identify. We discuss the main characteristics of an equilibrium allocation in this dynamic spatial framework, present a numerical example to illustrate the forces at work, and provide some supporting empirical evidence. |
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