ABSTRACT
The chapter examines the first large group of the most recent theories on growth, whose distinctive feature is the resumption of macroeconomic models based on the increasing returns hypothesis. These new theories are rooted in Gunnar Myrdal and Kaldor's model of cumulative circular causation, which they employ to interpret growth as a cumulative, endogenous and selective process. The models described hypothesize the existence of specific polarities in which development comes about as a result of increasing returns in the form of learning processes, economies of scale, localization economies and urbanization economies that set off a virtuous circle of cumulative development. The success of the new economic geography approach resides in the formal elegance with which it accounts for spatial phenomena, within a framework of general economic equilibrium. The chapter also deals with models that assume the existence of increasing returns to interpret development as resulting from a cumulative process of demand/supply growth.
