Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/52436
Authors: 
Grossmann, Volker
Year of Publication: 
2011
Series/Report no.: 
CESifo working paper: Fiscal Policy, Macroeconomics and Growth 3626
Abstract: 
This paper develops a two-sector R&D-based growth model with congestion effects from increasing urban population density. We show that endogenous technological progress causes structural change if there are positive productivity spillovers from the modern to the traditional sector and Engel's law holds. In turn, urban congestion effects cause a productivity slowdown in the modern sector. Eventually, economic growth may cease in the long-run. We also show that land dilution from a higher workforce may give rise to negative scale effects on GDP per capita. Finally, we investigate how the optimal land allocation depends on the strength of urban congestion effects.
Subjects: 
congestion
endogenous growth
Engel's law
structural change
urbanization
JEL: 
O10
O30
O40
Document Type: 
Working Paper

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