When Geography Matters for Growth: Market Inefficiencies and Public Policy Implications

Dr. Montmartin, University of Nice Sophia-Antipolis

We propose a unique market and social planner solution for a generalized New Economic Geography and Growth model to highlight the importance of taking account of the existence of agglomeration externalities in an analysis of market inefficiencies, which allows us to provide some important implications for public policy. This framework among other things, allows us to disentangle an insufficient growth condition from an under-investment in R&D condition which in turn allows us to explain various market steady state situations. For instance, it provides an explanation for situations where the market economy grows too slowly and over-invest in R&D (as opposed to an a-spatial model). By evaluating the effects of two strategic policies, namely innovation policy and industrial policy, on market inefficiencies, we show that (1) the efficiency of a policy evolves strongly with the market economy situation and no policy is the most efficient in all situations, (2) the geography of economic activities and the question of over or under- agglomeration of the market economy plays a central role on the relative efficiency of policies and (3) industrial and innovation policies are only partially complementary but policy-mixes can be justified if some market gaps are more important than others.

About the speaker
Benjamin Montmartin is assistant professor in Economics at the Institut Supérieur d’Economie et de Management (ISEM), the economic department of the University Nice-Sophia-Antipolis. He teaches mainly macroeconomics, economics of innovation and applied econometrics. His main research interests are at the crossroads of economic growth, economic geography and economics of innovation. More precisely, his current research program explores two directions: 1) Developing trade and growth models to better understand market inefficiencies (especially agglomeration externalities) and public policy implications. 2) Developing regional and macro evaluations of R&D policies using spatial econometrics tools These research projects are actually funded by the Agence Nationale de la Recherche (ANR). Benjamin Montmartin is also Deputy Chairman of EuroLIO (European Localized Innovation Observatory), which is a European academic network that promotes research in economics while helping local authorities to understand the dynamics of their territory.

Venue: Conference Student

Date: 03 September 2015

Time: 13:00 - 14:00  CEST