The Formation of Urban Centers under R\&D and Spillover Externalities
AbstractThis paper proposes a model of urban agglomeration in conjunction with imperfect competition and endogenous product R\&D of firms. The quality of differentiated manufacturing goods is a result of R\&D services provided by research firms. Sectoral interactions are subject to spatially dependent transaction costs and (knowledge) spillover externalities. The paper analyzes the existence of fundamental city patterns with respect to R\&D intensity and the degree of localization in knowledge production. The model features three equilibrium formations: a monocentric, a mixed, and a perfectly integrated pattern, whereas the R\&D intensity always increases towards the city center. However, product quality and the corresponding R\&D expenditures of firms are not necessarily increasing with the city size; a result, which also renders decisive implications of local innovation policy.
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Bibliographic InfoPaper provided by Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Hannover Economic Papers (HEP) with number dp-430.
Length: 37 pages
Date of creation: Sep 2009
Date of revision:
Bid-rent; Land Use; R\&D; Externalities;
Find related papers by JEL classification:
- R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
- R14 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Land Use Patterns
This paper has been announced in the following NEP Reports:
- NEP-ALL-2009-10-10 (All new papers)
- NEP-GEO-2009-10-10 (Economic Geography)
- NEP-INO-2009-10-10 (Innovation)
- NEP-URE-2009-10-10 (Urban & Real Estate Economics)
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