Agglomeration (Dis-) Economies and Regional Economic Growth as a Spatial Economy

집적 (불)경제와 공간경제로서의 지역 경제 성장

A regional economy is characterized as a spatial economy. However the literature shows that it has been treated as a point economy since space is little recognized in regional modeling due to mathematical complication. This leads to the fact that regional model does not sufficiently represent regional characteristic. This paper attempts to construct a regional growth model in a partial equilibrium framework specifically taking into consideration land as a primary factor. The model is formulated largely neoclassical. Labor is assumed to move in response to differences in the wage rate, while capital is perfectly mobile across regions. The paper shows that two growth equilibrium points exist, one stable equilibrium point and the other unstable equilibrium point. The unstable growth equilibrium indicates the existence of minimum threshold that a region must overcome the minimum threshold to grow constantly. Consequently, directions of regional growth are characterized by two growth paths depending on the initial condition of a region. That is to say, a region below the minimum threshold is converging toward the lower stable equilibrium point over time. When a regional economy initially lies above the minimum threshold, it will grow forever. A regional economy is not thus necessarily converging a stationary is not thus necessarily converging a stationary equilibrium point through factor movement. Finally, the impacts of the presence of agglomeration economies and diseconomies are analyzed through the phase diagram. The paper also shows that agglomeration economies result in lowering the minimum threshold and in escalating the level of stable equilibrium However, when agglomeration diseconomies prevail, the results are opposite, i.e., rising the minimum threshold of growth and lowering the growth level of stable equilibrium.