The unintended consequences of increasing returns to scale in geographical economics
AuthorsSteven Bond-Smith
PublishedDecember 2019
PublisherBankwest Curtin Economics Centre
ISBN978-1-925757-04-0
ISSN2202-2791
Number of Pages26
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.
The Bankwest Curtin Economics Centre team acknowledges the Wadjuk Nyungar people as the traditional owners of the land on which the Centre is situated.