The Core-Periphery Model and Endogenous Growth: Stabilising and De-Stabilising Integration
NBER Working Paper No. 6899
traditionally seen only in terms of trade costs, many aspects of economic integration are more naturally viewed as lowering the cost of trading information rather than goods, i.e. as reducing the extent to which learning externalities are localised. Raising learning spillovers is stabilising, so integration may encourage geographic dispersion (the traditional result is that integration tends to encourage agglomeration). This may be useful for evaluating real-world regional policies e.g. subsidisation of universities, technical colleges and high-technology industrial parks in disadvantaged regions that are aimed at combating the localisation of learning externalities. Finally we show that agglomeration of industry is favourable to growth and that this growth effect can mitigate, but not reverse, losses suffered by residents of the periphery when catastrophic agglomeration occurs.
Published: Baldwin, Richard E. and Rikard Forslid. "The Core-Periphery Model And Endogenous Growth: Stabilizing And Destabilizing Integration," Economica, 2000, v67(267,Aug), 307-324.