INTRODUCTION

Globalization is a multifaceted process. This chapter aims to address two of them that we consider as central for the future of our economies. Firstly, we build on the idea that knowledge spillovers are an important channel in the spatial diffusion of technological progress. Our goal is to understand how these spillovers affect the growth of various regions, especially through their spatial extent. Secondly, it is recognized that the contemporary and spectacular decrease in communication costs deeply affects the organization of firms through the spatial fragmentation of the supply chain. This in turn has a knock-on effect on the way the space-economy is organized. The common thread of this chapter therefore is to find out how the transfer of knowledge and information across space affects the location of economic activity. Note a major difference between spillover and communication: in the former, the information learned from others is the involuntary consequence of activities undertaken by some agents; in the latter, communication costs arise because geographically separated agents choose to exchange information.

As seen in Chapter 8, market integration might well be accompanied by the appearance of some core regions whose wealth is, in part, obtained at the expense of peripheral regions: the average welfare in the region accommodating the manufacturing sector rises but it decreases in the other. So far, however, such a result has been obtained in the context of static models in which the total number of firms and varieties is constant.