Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 14: ICT, Functional Urban Regions and the New Economic Geography

Charlie Karlsson ()
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Charlie Karlsson: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: The rapid developments in information and communication technologies (ICT) and the increased use of ICT motivate the vision of an evolving digital economy. During the last decade this evolving digital economy has been the pre-eminent driver of structural change and economic growth at both the national and the regional level in the developed, industrialised economies. The reason is, of course, that ICT functions as a new generic technology, which impacts society both broadly and deeply. ICT has, in essence, destabilised the near equilibrium conditions of an earlier time and contributed to conditions of greater disequilibrium. Thus, one major implication of ICT is that it has created prime conditions for entrepreneurial discovery and action. This implies that there are strong motives to study various aspects of the digital economy, since ICT continues to penetrate the developed economies also after the burst of the ICT stimulated stock market bubble. In this paper we analyse one aspect of the digital economy, namely its effect of the system of functional urban regions. The motivation for this focus is that ICT offers new tools to organise information and enables major reductions in geographical transaction costs, the full implications of which is not yet well understood.

Keywords: ICT; Digital Economy; Functional Urban Regions; New Economic Geography; Geographical Transaction Cost

JEL-codes: L86; O30; R11

24 pages, November 24, 2004

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