EXOGENOUS AND ENDOGENOUS SPATIAL GROWTH-MODELS

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.