Teritorial cohesion in the context of neoclassical growth models

The Lisbon Treaty and the EU's high-level strategy Europe 2020 enrich the notion of economic and social cohesion by introducing a third territorial dimension. The ambiguity of territorial cohesion, however, poses a problem for policy makers and analysts. In this paper territorial cohesion is defined using the concept of territorial optimum which combines maximization of regional product with territorial utility. The main objective of the paper is to analyze how the elements of territorial optimum are embodied in the traditional neoclassical and endogenous growth models. The analysis is divided into two parts: theoretical and empirical one. In the former the role of space and territory in the main neoclassical models is evaluated and interpreted. The latter part is structured in accordance to the components of territorial optimum. Particular emphasis is placed upon such spatial categories as agglomeration effects and public infrastructure. Several general conclusions and insights are drawn showing that even traditional neoclassical growth models provide an implicit territorial interpretation of development determinants. However, the overwhelming majority of both theoretical and empirical concepts based on the neoclassical paradigm allow only for one or two spatial factors and do not take into account the significance and complexity of territory as an additional factor affecting both production and productivity. It gives rise to further attempts at implementing territory in the mainstream modelling framework in a more robust and credible way.