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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 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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