Industrial Clusters: Equilibrium, Welfare and Policy
AbstractThis paper studies the size and number of industrial clusters that arise in a multi-country world in which one sector has a propensity to cluster because of increasing returns to scale. Equilibrium will generally have smaller clusters than the world welfare optimum, and possibly too many countries with a cluster. Countries have an incentive to use policy to attract an industrial cluster, but the equilibrium of the policy game between governments coincides with the world optimum so there is no 'race to the bottom'. Capping subsidy rates would lead to a proliferation of too many and too small clusters. Copyright (c) The London School of Economics and Political Science 2004.
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Bibliographic InfoArticle provided by London School of Economics and Political Science in its journal Economica.
Volume (Year): 71 (2004)
Issue (Month): 284 (November)
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Other versions of this item:
- Norman, Victor D & Venables, Anthony J., 2001. "Industrial Clusters: Equilibrium, Welfare and Policy," CEPR Discussion Papers 3004, C.E.P.R. Discussion Papers.
- F10 - International Economics - - Trade - - - General
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
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