Endogenous Technological Progress and Spatial Interdependence

This paper explores growth models for regions or countries which are highly interdependent, but which may differ in initial factor endowments and technology. The regions interact through trade, factor mobility and the diffusion of innovations. The implications of traditional and recent growth theories for an explicit two-region situation are identified and the properties of the growth process are estabiished. The role of policy instruments such as the investment ratio and expenditure on R&D are discussed. Both demand and supply side considerations receive attention. It is found that endogenous technical change and scale effects are likely to lead to uneven development. While steady-state growth paths may exist on which the regions grow at different rates, the stability of such steady-state growth depends on a range of behavioural parameters and the mobility of production factors.