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Title: The Core-Periphery Model and Endogenous Growth

Author(s): Richard Baldwin and Rikard Forslid

Publication Date: November 1997

Keyword(s): Economic Geography and Endogenous Growth

Programme Area(s): International Trade and Regional Economics

Abstract: This paper presents a model in which long-run growth and industrial location are jointly endogenous. Specifically, it introduces Romer-Grossman-Helpman endogenous growth into Krugman?s core-periphery model with footloose labour. The paper focuses on stability of the symmetric equilibrium, showing that growth is a powerful destabilising force. For instance, even with prohibitive trade barriers, the symmetric equilibrium is unstable as long as workers? discount rates are not too high. It also shows that inter-regional learning spillovers are a stabilizing force. Finally, the paper shows that agglomeration of industry is favourable to growth in both regions, so positive growth effects might offset the well-known static welfare loss that the periphery experiences when the core-periphery outcome occurs.

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Bibliographic Reference

Baldwin, R and Forslid, R. 1997. 'The Core-Periphery Model and Endogenous Growth'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=1749