Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/96980
Authors: 
Grafeneder-Weissteiner, Theresa
Prettner, Klaus
Year of Publication: 
2008
Series/Report no.: 
Vienna Institute of Demography Working Papers 1/2009
Abstract: 
This article investigates the effects of introducing demography into the New Economic Geography. We generalize the constructed capital approach, which relies on infinite individual planning horizons, by introducing mortality. The resulting overlapping generation framework with heterogeneous individuals allows us to study the effects of ageing on agglomeration processes by analytically identifying the level of trade costs that triggers catastrophic agglomeration. Interestingly, this threshold value is rather sensitive to changes in mortality. In particular, the introduction of a positive mortality rate makes the symmetric equilibrium more stable and therefore counteracts agglomeration tendencies. In sharp contrast to other New Economic Geography approaches, this implies that deeper integration is not necessarily associated with higher interregional inequality.
Subjects: 
Agglomeration
New Economic Geography
Trade and Growth
Constructed Capital Model
Population Ageing
Document Type: 
Working Paper

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