Localized technological externalities and the geographical distribution of firms
AbstractUsing an analytically solvable general equilibrium model, we study how the distribution of economic activities is affected by the trade-off between pecuniary externalities, as dependent on transportation costs, and localized technological externalities, as dependent on inter-regional spillovers. We model localized technological externalities as having a cost saving effect that can be interpreted as a technological advantage, like the presence of interfirms knowledge spillovers. Under the assumption of capital mobility and labour immobility, we show that whereas decreasing transportation costs, i.e. promoting market openness, leads to sudden agglomeration, increasing inter-regional spillovers, i.e. promoting technological openness, favors a smoother transition between different levels of firms concentration and ultimately leads to a less uneven distribution of welfare.
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Bibliographic InfoPaper provided by Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy in its series LEM Papers Series with number 2008/11.
Date of creation: 24 Apr 2008
Date of revision:
New Economic Geography; Agglomeration; Footloose capital models; Technological externalities; Market and technological openness;
Find related papers by JEL classification:
- F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies
- F15 - International Economics - - Trade - - - Economic Integration
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- O3 - Economic Development, Technological Change, and Growth - - Technological Change; Research and Development; Intellectual Property Rights
This paper has been announced in the following NEP Reports:
- NEP-ALL-2008-05-05 (All new papers)
- NEP-GEO-2008-05-05 (Economic Geography)
- NEP-NET-2008-05-05 (Network Economics)
- NEP-URE-2008-05-05 (Urban & Real Estate Economics)
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