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Localized technological externalities and the geographical distribution of firms

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  • Giulio Bottazzi
  • Pietro Dindo

Abstract

Using 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 Info

Paper 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.

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Date of creation: 24 Apr 2008
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Handle: RePEc:ssa:lemwps:2008/11

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Related research

Keywords: New Economic Geography; Agglomeration; Footloose capital models; Technological externalities; Market and technological openness;

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  1. Martin, Philippe & Ottaviano, Gianmarco Ireo Paolo, 1996. "Growing Locations: Industry Location in a Model of Endogenous Growth," CEPR Discussion Papers 1523, C.E.P.R. Discussion Papers.
  2. Tibor Scitovsky, 1954. "Two Concepts of External Economies," Journal of Political Economy, University of Chicago Press, vol. 62, pages 143.
  3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  4. Baldwin, Richard & Forslid, Rikard, 1997. "The Core-Periphery Model and Endogenous Growth," CEPR Discussion Papers 1749, C.E.P.R. Discussion Papers.
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Cited by:
  1. Giulio Bottazzi & Pietro Dindo, 2008. "An evolutionary model of firms location with technological externalities," LEM Papers Series 2008/27, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  2. Christ, Julian P., 2009. "The geography and co-location of European technology-specific co-inventorship networks," Violette Reihe Arbeitspapiere 31/2010, Promotionsschwerpunkt "Globalisierung und Beschaeftigung".

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