We examine two sets of economies, (19th century U.S. states and 20th century less developed countries) where growth rates are positively correlated with initial levels of development to document how these dynamic increasing returns operate. We find that open economies do not display a positive...

This study develops a model of endogenous growth based on increasing returns due to firms' technology choices. Particular attention is paid to the implications of these choices, combined with the substitution of capital for labor, on economic growth in a general equilibrium model in which the...

At the firm level, revenue and costs are well measured but prices and quantities are not. This paper shows that because of these data limitations estimates of returns to scale at the firm level are for the revenue function, not production function. Given this observation, the paper argues that,...

Pricing complementarities play a key role in determining the propagation of monetary disturbances in sticky price models. We propose a procedure to infer the degree of firm-level pricing complementarities in the context of a menu cost model of price adjustment using data on prices and market...

Should China build mega-cities or a network of linked middle-sized metropolises? Can Europe's mid-sized cities compete with global agglomeration by forging stronger inter-urban links? This paper examines these questions within a model of recombinant growth and endogenous local amenities. Three...

We study optimal merger policy in a dynamic model in which the presence of scale economies implies that firms can reduce costs through either internal investment in building capital or through mergers. The model, which we solve computationally, allows firms to invest or propose mergers according...

This paper develops and estimates a model of indivisibilities in shipping and economies of scale in consolidation. It uses highly detailed data on imports for which it is possible to observe the contents of individual containers. In the model, a firm is able to adapt to indivisibility...

In a world with two similar, developed economies, economic integration can cause a permanent increase in the worldwide rate of growth. Starting from a position of isolation, closer integration can be achieved by increasing trade in goods or by increasing flows of ideas. We consider two models...

Does national market size matter for industrial structure? This has been suggested by theoretical work on home market' effects, as in Krugman (1980, 1995). In this paper, I show that what previously was regarded as an assumption of convenience - transport costs only for the differentiated goods...

In this paper, I examine the relationship between increasing returns to scale and the geographic concentration of economic activity. Using data on U.S. counties, I estimate the structural parameters of the Krugman (1991) model of economic geography. The specification I use, which is derived from...