The Spatial Diffusion of Innovations and the Evolution of Regional Disparities

This paper investigates the concurrent effects on regional disparities ofthe speeds of innovation and of the spatial diffusion of knowledge. The aim is to investigatewhether an increase in the pace of innovation, identical in all regions, due toexogenous factors such as the «technological revolution» or policies targeting the«innovative effort» of territories, can give rise to increased disparities. In order toanswer these questions, the paper focuses on the role of interregionally shared knowledgeand shows that, due to the cumulativeness of knowledge, making the same innovativeeffort is not enough to maintain the same income per capita. Moreover, thespeed of innovation is not the only determinant, because a role of equal importance isplayed by the ease of interregional knowledge diffusion. To support this argument,first a new simple static model is built to extend symmetrically existing north-southmodels of trade and to rigorously represent the actual producers of goods whose productiontechnique is shared between regions. Then, building on the first model, tworeduced forms for the dynamics of innovation and diffusion flows are introduced -one probabilistically, the other with multiple equilibria. These lead to the same conclusion:an increase in the pace of innovation, even with structurally identical regions,may generate regional income disparities if knowledge is cumulative and spilloversare essentially local. It is finally shown, however, that the divergence effect ofincreased innovation pace can be counterbalanced by an increase in the speed of spatialknowledge diffusion.