The Annals of Regional Science

, Volume 52, Issue 2, pp 343–366 | Cite as

Agglomeration, inequality and economic growth

Original Paper

Abstract

Agglomeration and income inequality at country level can be both understood as concentration of physical and human capital in the process of economic development. As such, it seems pertinent to analyse their impact on economic growth considering both phenomena together. By estimating a dynamic panel specification at country level, this paper analyses how agglomeration and inequality (both their levels and their evolution) influence long-run economic growth. In line with previous findings, our results suggest that while high-inequality levels are a limiting factor for long-run growth, agglomeration processes can be associated with economic growth, at least in countries at early stages of development. Moreover, we find that the growth-enhancing benefits from agglomeration processes depend not only on the country’s level of development, but also on its initial income distribution (something, to the best of our knowledge, not considered before). In fact, probably suggesting a social dimension to congestion diseconomies, increasing agglomeration is associated with lower growth when income distribution is particularly unequal.

JEL Classification

O1 O4 R1 

Notes

Acknowledgments

We thank Mark Partridge, Enrique Lopez-Bazo and two anonymous referees for valuable comments. We are also grateful for comments received at the AQR-IREA Seminars-2011, at the Encuentros de Economía Aplicada 2012, at several Regional Science Association International (RSAI) conferences (the 9th World Congress, 52nd European Congress and the 59th Annual North American Meetings) and at the Sixth World Bank Urban Research and Knowledge Symposium (and to the anonymous referee assigned for such Symposium). Both authors acknowledge the financial support of CICYT ECO2010-16006.

Supplementary material

168_2014_589_MOESM1_ESM.docx (194 kb)
Supplementary material 1 (docx 193 KB)

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  1. 1.AQR-IREA—Universidad de BarcelonaBarcelonaSpain

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