infonet-economy

I present a stylized theory of regional development in which regional ‘first nature’
characteristics do not map uniquely into regional outcomes. The ‘second nature’ force
is social learning about fixed but unknown regional characteristics which can bring
about self-reinforcing regional development. The key difference from other agglomeration
economies is that the extent of local economic activity only influences beliefs
about productivity but not actual productivity so that there are no localized external
increasing returns.