In this paper, we investigate the impact on aggregate regional utility
as a result of both exogenous growth and endogenous growth in a spati
al system. We will first analyze the case of two closed regions, follo
wed by the case of two open regions. The main instrument used in our a
pproach to study the changes in collective regional welfare is Dynamic
Programming. The traditional exogenous Solow growth model forms the b
asis of our paper. The analysis of this model will be extended to a co
mparison of two closed regions with exogenous growth. By introducing a
case of a common labour market, we are able to investigate exogenous
growth between two open regions. For the analysis of endogenous growth
, we adopt the same structure as the one used for the investigation of
exogenous growth models. In this framework, an investment in knowledg
e is considered as the endogenous driving force. Finally, we take a cl
oser look at the timing of cost-reducing investments. In total, seven
related but distinct cases are identified and studied in more detail.