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Application of keynesian theory and new economic geography in Portugal. Differences and similarities

Martinho, Vítor João Pereira Domingues (2011): Application of keynesian theory and new economic geography in Portugal. Differences and similarities.

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Abstract

With this work we try to analyse the agglomeration process in the Portuguese regions, using the New Economic Geography models. In these models the base idea is that where has increasing returns to scale in the manufactured industry and low transport costs, there is agglomeration. This work aims to test, also, the Verdoorn Law, with the alternative specifications of (1)Kaldor (1966), for the 28 NUTS III Portuguese in the period 1995 to 1999. It is intended to test, yet in this work, the alternative interpretation of (2)Rowthorn (1975) about the Verdoorn's Law for the same regions and periods. With this study we want, also, to test the Verdoorn´s Law at a regional and a sectoral levels (NUTs II) for the period 1995-1999. The importance of some additional variables in the original specification of Verdoorn´s Law is yet tested, such as, trade flows, capital accumulation and labour concentration. This study analyses, also, through cross-section estimation methods, the influence of spatial effects in productivity in the NUTs III economic sectors of mainland Portugal from 1995 to 1999, considering the Verdoorn relationship.

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