Output per worker is radically unevenly distributed across space. Several authors have asked why the differences are so large between countries and hypothesized that differences in social infrastructure provide an answer. However, differences in output per worker are also very different when...

Knowledge spillovers have recently been analysed by Barde (2009) and Ostbye (2010) in a spatial general equilibrium framework. Both studies lack explicit micro foundations for the spillovers - spillovers just take place and depend on firm density. The models must therefore be seen as reduced...