ABSTRACT
One of the most salient features of the geography of economic activity is concentration. Over the course of economic development, the patterns of regional agglomeration become more pronounced: different regions grow at differential rates, and a few metropolitan areas continue to attract people while others remain stagnant or even witness decline in their population figures. It is observed by Bairoch (1993) that great disparities between rich and poor regions are recent. It is important to know why and how they change over time. The emergence of large cities is a fact that Kuznets (1966) associates with industrialization. The link between industrialization and agglomeration has long been recognized by economists. The development theories by Myrdal (1957) and Hirschman (1958) identify a fundamental interdependence between industrial growth and the geographical concentration of industry: industrialization collects human and capital resources in a given location and the resulting agglomeration sustains the conditions for further growth. Recent literature on economic geography formalizes such cumulative processes in models based on increasing returns to scale.1 The strong positive correlation between industrialization and geographic clustering of economic activities has been observed by empirical studies as well.2 Nevertheless, the new economic geography has not succeeded in including capital accumulation and infrastructures formation as endogenous processes of industrialization and agglomeration. This chapter concentrates on the study of interregional development with capital accumulation, taking account of factors such as environment and regional economic structure.
