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The unintended consequences of increasing returns to scale in geographical economics

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  • Steven Bond-Smith

    (Bankwest Curtin Economic Centre, Curtin University)

Abstract
Increasing returns to scale is now fundamental to both economics and economic geography. But first generation theories of endogenous growth imply an empirically-refuted scale effect. This scale effect and assumptions to negate the scale effect both imply unintentional spatial consequences. A review of the broad economic geography literature reveals the widespread use and misuse of first generation and semi-endogenous growth techniques despite these distortions. Techniques are suggested for avoiding these unintended spatial consequences. Crucially, the scale-neutral Schumpeterian branch of endogenous growth theory enables research in economic geography to focus on the distinctly spatial mechanisms that define the spatial economy.

Suggested Citation

  • Steven Bond-Smith, 2019. "The unintended consequences of increasing returns to scale in geographical economics," Bankwest Curtin Economics Centre Working Paper series WP1904, Bankwest Curtin Economics Centre (BCEC), Curtin Business School.
    • Handle: RePEc:ozl:bcecwp:wp1904
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    File URL: https://bcec.edu.au/assets/2019/11/BCEC-Working-Paper-The-unintended-consequences-of-increasing-returns-to-scale-in-geographical-economics.pdf
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    More about this item

    Keywords

    endogenous growth; scale effects; increasing returns; innovation; economic geography;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • O41 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - One, Two, and Multisector Growth Models

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