Growth agglomeration effects in spatially interdependent Latin American regions

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September 2015
Paper author(s): 
Carolina Guevara
Macroeconomics - Economic growth - Monetary Policy

Identifying the mechanisms of agglomeration is a key element towards understanding how agglomeration impacts growth. The theoretical literature analyzing the link between agglomeration and growth has been development through the association of different concepts and findings from several theories. Among them, important findings derive from the conjunction of elements of growth theory and elements from economic geography theory. Based on the New Economic Geography, growth models can predict how firms choose their location to produce and how the resulting distribution of economic activities affects the rate of technological progress (Martin and Ottaviano, 1999). Other theoretical advances have been development in urban economics. This theoretical approach enables the determination of the mechanisms of city formation and how human capital accumulation leads to increasing the city size and, in turn, how tit promotes technological progress. A distinction between developed and developing countries is also feasible to the extent that later advances in urban theory recognize the underlying characteristics of economies.


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