Industrial Clusters: Equilibrium, Welfare and Policy
AbstractThis Paper studies the size and number of industrial clusters that will arise in a multi-country world in which, because of increasing returns to scale, one sector has a propensity to cluster. It compares the equilibrium with the world welfare maximum, showing that the equilibrium will generally have clusters that are too small, while there are possibly too many countries with a cluster. Allowing national governments to subsidize will move the equilibrium to the world welfare maximum, so there is no ‘race to the bottom’. If subsidy rates were capped then there would be a proliferation of too many and too small clusters.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3004.
Date of creation: Oct 2001
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Other versions of this item:
- Victor D. Norman & Anthony J. Venables, 2004. "Industrial Clusters: Equilibrium, Welfare and Policy," Economica, London School of Economics and Political Science, vol. 71(284), pages 543-558, November.
- F10 - International Economics - - Trade - - - General
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
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