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Journal of Economic Geography Advance Access originally published online on June 13, 2007
Journal of Economic Geography 2007 7(5):635-649; doi:10.1093/jeg/lbm018
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Right arrow B25 - Historical; Institutional; Evolutionary; Austrian
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© The Author (2007). Published by Oxford University Press. All rights reserved. For Permissions, please email: journals.permissions@oxfordjournals.org

A theoretical framework for evolutionary economic geography: industrial dynamics and urban growth as a branching process

Koen Frenken* and Ron A. Boschma*

* Section of Economic Geography, Urban and Regional research centre Utrecht (URU), Faculty of Geosciences, Utrecht University, The Netherlands.

email < K.Frenken{at}geo.uu.nl>

JEL classifications:: B25, B52, L11, L25, R0, R1, R12

We propose a framework that specifies the process of economic development as an evolutionary branching process of product innovations. Each product innovation provides a growth opportunity for an existing firm or a new firm, and for an existing city or a new city. One can then obtain both firm size and city size distributions as two aggregates resulting from a single evolutionary process. Gains from variety at the firm level (economies of scope) and the urban level (Jacobs externalities) provide the central feedback mechanism in economic development generating strong path dependencies in the spatial concentration of industries and the specialization of cities. Gains from size are also expected, yet these are ultimately bounded by increasing wages. The contribution of our framework lies in providing a micro-foundation of economic geography in terms of the interplay between industrial dynamics and urban growth. The framework is sufficiently general to investigate systematically a number of stylized facts in economic geography, while at the same time it is sufficiently flexible to be extended such as to become applicable in more specific micro-contexts. A number of extensions related to the concepts of knowledge spillover and lock-in, are also discussed.

Keywords: evolutionary economic geography, urban growth, firm growth, Zipf, branching, innovation
Date submitted: 16 November 2006     Date accepted: 12 March 2007


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