A simple dynamic model of uneven development and overtaking.

This paper extends the Brezis, Krugman and Tsiddon (1993) Ricardian leapfrogging model, allowing for a wider variety of development patterns. In a two-region two-sector economy localized leaming-by-doing causes specialization and uneven development. Technological change reverses the existing development pattern if the new technology locates in the lowwage region. However, in contrast to Brezis et al., the development pattern may also get reinforced if spillovers between the old and the new technology make the leading region a more attractive location. The results are not affected by including capital and extending the model to a two-factor Heckscher-Ohlin framework.Trade and growth; Regional growth; Uneven development; Localized externalities; Structural change;

Foreign direct investment and spillovers : gradualism may be better

In contrast to the standard literature, we show that the presence of spillovers may justify temporarily restricting the inflow of foreign direct investment. Our argument is based on two stylized features of spillovers: first, technology transfers --- and subsequent spillovers --- are limited by the economy's absorptive capacity; and second, spillovers take time to materialize. By letting capital in more gradually, initial investment has the time to create spillovers --- and upgrade the economy's absorptive capacity --- before further investment occurs. This allows subsequent capital inflows to benefit from greater technology transfers. As a result, the economy converges to a steady state with a superior technology and a greater capital stock.We acknowledge financial support from the European Union Directorate General XII (project SERD-1999-000102) and of the Comunidad de Madrid (project 06/0186/2002

The evolution of markets and the revolution of industry : a quantitative model of England’s development, 1300-2000

This paper argues that an economy's transition from Malthusian stagnation to modern growth requires markets to reach a critical size, and competition to reach a critical level of intensity. By allowing an economy to produce a greater variety of goods, a larger market makes goods more substitutable, raising the price elasticity of demand, and lowering mark-ups. Firms must then become larger to break even, which facilitates amortizing the fixed costs of innovation. We demonstrate our theory in a dynamic general equilibrium model calibrated to England's long-run development and explore how various factors affect the timing of takeoff.European Community's Seventh Framework ProgramFinancial aid from the European Commission (EFIGE Grant 225343 and HI-POD Grant 225551), the Comunidad de Madrid (PROCIUDAD-CM), and the Spanish Ministry of Science (ECO2008-01300) is acknowledged

Spatial Development

We present a theory of spatial development. A continuum of locations in a geographic area choose each period how much to innovate (if at all) in manufacturing and services. Locations can trade subject to transport costs and technology di¤uses spatially across locations. The result is an endogenous growth theory that can shed light on the link between the evolution of economic activity over time and space. We apply the model to study the evolution of the U.S. economy in the last few decades and that the model can generate the reduction in the employment share in manufacturing, the increase in service productivity in the second part of the 1990s, the increase in land rents in the same period, as well as several other spatial and temporal patterns

FOREIGN DIRECT INVESTMENT AND SPILLOVERS: GRADUALISM MAY BE BETTER

In contrast to the standard literature, we show that the presence of spillovers may justify temporarily restricting the inflow of foreign direct investment. Our argument is based on two stylized features of spillovers: first, technology transfers --- and subsequent spillovers --- are limited by the economy’s absorptive capacity; and second, spillovers take time to materialize. By letting capital in more gradually, initial investment has the time to create spillovers --- and upgrade the economy’s absorptive capacity --- before further investment occurs. This allows subsequent capital inflows to benefit from greater technology transfers. As a result, the economy converges to a steady state with a superior technology and a greater capital stock.

Changes in the spatial concentration of employment across US counties : a sectoral analysis 1972–2000.

Using US county data, we estimate employment growth equations to analyze how the spatial distribution of jobs has changed between 1972 and 2000. We find that total employment has become increasingly concentrated. This aggregate picture hides important sectoral differences though: whereas non-service employment has been spreading out, service jobs have clustered in areas of high aggregate employment. By controlling for employment at different distances, we explicitly take into account the spatial dimension. This allows us to conclude that the spreading out of non-service jobs has benefitted counties 20 to 70 km away from large agglomerations, whereas the concentration of services has come at the expense of jobs in the surrounding 20 kilometers.Economic geography; Spatial economics; US counties; Sectoral employment;

The changing spatial distribution of economic activity across U.S. counties.

This paper studies the recent trends in the spatial distribution of economic activity in the United States. Using county-level employment data for 13 sector -which cover the entire economy- we apply semi-parametric techniques to estimate how agglometarion and congestion effects have changed between 1972 and 1992. Non-service sectors are found to be spreading out and moving away from centers of high economic activity to areas 20 to 60 kilometers away; service sectors, on the contrary, are increasingly concentrating in areas of high economic activity by attracting jobs from the surrounding 20 kilometers.Economic geography; Spatial externalities; U.S. counties;

Spatial Growth and Industry Age

U.S. county data for the last 20 or 30 years show that manufacturing employment has been deconcentrating. In contrast, the service sector exhibits concentration in counties with intermediate levels of employment. This paper presents a theory where local sectoral growth is driven by technological diffusion across space. The age of an industry -- measured as the time elapsed since the last major general purpose technology innovation in the sector -- determines the pattern of scale dependence in growth rates. Young industries exhibit non-monotone relationships between employment levels and growth rates, while old industries experience negative scale dependence in growth rates. The model then predicts that the relationship between county employment growth rates and county employment levels in manufacturing at the turn of the 20th century should be similar to the same relationship in services in the last 20 years. We provide evidence consistent with this prediction.

Linguistic diversity and redistribution

This paper investigates the effect of linguistic diversity on redistribution in a broad cross-section of countries. We use the notion of "linguistic distances" and show that the commonly used fractionalization index, which ignores linguistic distances, yields insigni cant results. However, once distances between languages are accounted for, linguistic diversity has both a statistically and economically signi cant effect on redistribution. With an average level of redistribution of 9.5 percent of GDP in our data set, an increase by one standard deviation in the degree of diversity lowers redistribution by approximately one percentage point. We also demonstrate that other measures, such as polarization and peripheral heterogeneity, provide similar results when linguistic distances are incorporated.The authors wish to thank the nancial support of the Comunidad de Madrid (grant 06/HSE/0157/2004) and of the Fundación BBVAPublicad

On spatial dynamics.

It has long been recognized that the forces that lead to the agglomeration of economic activity and to aggregate growth are similar. Unfortunately, few formal frameworks have been advanced to explore this link. We critically discuss the literature and present a simple framework that can circumvent some of the main obstacles we identify. We discuss the main characteristics of an equilibrium allocation in this dynamic spatial framework, present a numerical example to illustrate the forces at work, and provide some supporting empirical evidence.Dynamic spatial models; Technology di usion; Spillovers; Trade; Factor Mobility; Growth;