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The Formation of Urban Centers under R\&D and Spillover Externalities

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Author Info
Kranich, Jan

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Abstract

This 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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Publisher Info
Paper provided by Universität Hannover, Wirtschaftswissenschaftliche Fakultät in its series Diskussionspapiere der Wirtschaftswissenschaftlichen Fakultät der Universität Hannover with number dp-430.

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Length: 37 pages
Date of creation: Sep 2009
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Handle: RePEc:han:dpaper:dp-430

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Related research
Keywords: Bid-rent; Land Use; R\&D; Externalities;

Find related papers by JEL classification:
R1 - Urban, Rural, and Regional Economics - - General Regional Economics
R14 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Land Use Patterns

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References listed on IDEAS
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  1. Simona Iammarino & Philip McCann, 2006. "The Structure and Evolution of Industrial Clusters: Transactions, Technology and Knowledge Spillovers," SPRU Electronic Working Paper Series 138, University of Sussex, SPRU - Science and Technology Policy Research. [Downloadable!]
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