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Philippe Martin et al., « Growth and Agglomeration », Archive ouverte de Sciences Po (SPIRE), ID : 10670/1.uwhjet
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This article presents a model in which growth and geographic agglomerationof economic activities are mutually self-reinforcing processes. Economic agglomerationin one region spurs growth because it reduces the cost of innovation inthat region through a pecuniary externality due to transaction costs. Growth fostersagglomeration because, as the sector at the origin of innovation expands,new firms tend to locate close to this sector. Agglomeration implies that all innovationand most production activities take place in the core region. However, asnew firms are continuously created in the core, some relocate their productionto the periphery.