Handbook of Regional Growth and Development Theories
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Handbook of Regional Growth and Development Theories

Edited by Roberta Capello and Peter Nijkamp

Regional economics – an established discipline for several decades – has gone through a rapid pace of change in the past decade and several new perspectives have emerged. At the same time the methodology has shown surprising development. This volume brings together contributions looking at new pathways in regional economics, written by many well-known international scholars. The most advanced theories, measurement methods and policy issues in regional growth are given in-depth treatment.
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Chapter 14: Agglomeration Externalities, Innovation and Regional Growth: Theoretical Perspectives and Meta-Analysis

Henri L.F. de Groot, Jacques Poot and Martijn J. Smit


Henri L.F. de Groot, Jacques Poot and Martijn J. Smit 14.1 Introduction Since the mid-1980s there has been a remarkable revival of research devoted to both theoretical modelling and empirical verification of the causes of long-run economic growth at spatial scales ranging from the global economy down to the local community (see, for example, Barro and Sala-i-Martin, 2004, for an overview of the field). One of the major drivers of this research activity was the realisation that growth cannot be understood without investigating the characteristics, geography, causes and consequences of innovation – namely, the implementation of new or significantly improved products, processes, business practices, workplace organisation or external relations (OECD, 2005). Innovation takes place in dynamically diverse, geographically concentrated and imperfectly competitive spaces that can only be analysed by abandoning conventional assumptions of perfectly competitive markets and constant returns to scale. This realisation led to the development of ‘new’ theories of growth, economic geography, trade and industrial organisation (see, for example, Krugman, 1995; Brakman and Heijdra, 2004). In the knowledge-driven globally connected regional economy, agglomeration forces that rely on proximity continue to increase in importance. This occurs paradoxically despite declining real costs of information, communication and transportation. The relevance of agglomeration is revealed by the continuing urbanisation of the global population. About half the world population now lives in cities and this is expected to increase further to 60 per cent by 2030 (UNFPA, 2007). Although the number of ‘world cities’ with populations of more than 10 million inhabitants...

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