Aki Kangasharju, Sari Pekkala, Government Institute for Economic Research, Helsinki, Finland, Jörg Schoder, University of Freiburg, Institute of Public Finance, Freiburg, Germany, Jos Van Ommeren, Free University
Regional Economics
, Amsterdam, The Netherlands
Agglomeration and Growth in the Long Run - Empirical Evidence from Europe (assigned to theme
New Economic Geography (NEG) models postulate an inverse relationship between innovation costs and the degree of agglomeration. Consequently, spatial concentration of economic activity can affect the growth rate of a whole economy in a positive way. However, the idea of circular causation (which is characteristic for NEG-models) implies, that growth also affects geography, which makes empirical testing difficult. Empirically the question of agglomeration and growth has already been studied. In our review of the existing literature two aspects will become clear. First, there are few studies that directly address the question of agglomeration and growth. Secondly, the long-run relationship between agglomeration and economic growth on the national level has not yet been studied. We try to fill this last gap knowing that it does not come without the cost of a rather simplistic measurement of agglomeration (which is necessary due to data restrictions). In our econometric study we employ data on population by regions and national GDP from Finland, Germany, France and the Netherlands. We construct different measures for agglomeration and test the existence of the relationship using Granger causality test in the panel data context.
 | Conference organized through conf-vienna
(copyright Gunther Maier) |