The Role of Key Regions in Spatial Development

Becker, Raphael N.; Henkel, Marcel (February 2020). The Role of Key Regions in Spatial Development (DICE Discussion Papers 331). Heinrich-Heine-University Düsseldorf

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We discuss the role of key regions in spatial development. Local productivity shocks can
affect the entire economy as they expand via tight connections in the domestic production
network and influence the geographical allocation of labor. In particular, we identify the set
of key regions with the highest potential to affect aggregate productivity, output, and welfare.
Key regions are central locations with strong spatial linkages in the production network but
are not too large and congested so they can still attract additional labor in response to
positive productivity shocks without local rents and input costs rising too much. Using a
spatial equilibrium model and data from German districts, we find that a relatively modest
development of productivity in key regions lowered German output and welfare growth by
a factor of two from 2010 to 2015

Item Type:

Working Paper


03 Faculty of Business, Economics and Social Sciences > Department of Economics
11 Centers of Competence > Center for Regional Economic Development (CRED)

UniBE Contributor:

Henkel, Marcel


300 Social sciences, sociology & anthropology > 330 Economics




DICE Discussion Papers


Heinrich-Heine-University Düsseldorf




Dino Collalti

Date Deposited:

13 Jan 2021 17:20

Last Modified:

13 Jan 2021 17:20


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