No. 2/2011: Migration and dynamic agglomeration economies: Regional income growth in Norway
Jørn Rattsø and
Hildegunn E. Stokke
The existence of agglomeration economies is well established. We study dynamic agglomeration effects and expect regional income divergence when people move from the periphery to cities. We use distribution analysis, Kernel density functions and first order Markov chains, to investigate whether data from Norwegian regions 1972-2008 with strong urbanization are consistent with agglomeration effects. The analysis shows overall income convergence, contrary to the hypothesis of agglomeration economies. Regions with large increases in population do not show systematic higher income growth. The probabilities of moving up and down the income distribution are independent of the migration pattern. We conclude that strong dynamic agglomeration effects linked to inmigration are inconsistent with the data.