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Knowledge Exchange, Matching, and Agglomeration

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  • Marcus Berliant

    (Department of Economics, Washington University in St. Louis)

  • Robert R. Reed III

    (Iowa State University)

  • Ping Wang

    ()
    (Department of Economics, Vanderbilt University)

Abstract

Despite wide recognition of their significant role in explaining sustained growth and economic development, uncompensated knowledge spillovers have not yet been fully modeled with a microeconomic foundation. The main purpose of this paper is to illustrate the exchange of knowledge as well as its consequences on agglomerative activity in a general-equilibrium search-theoretic framework. Agents, possessing differentiated types of knowledge, search for partners to exchange ideas and create new knowledge in order to improve production efficacy. When individuals' types of knowledge are too diverse, a match is less likely to generate significant innovations. We demonstrate that the extent of agglomeration has significant implications for the patterns of information flows in economies. Further, by simultaneously determining the patterns of knowledge exchange and the spatial agglomeration of an economy we identify additional channels for interaction between agglomerative activity and knowledge exchange. Finally, contrary to previous work in spatial agglomeration, our model suggests that agglomerative environments may be either under-specialized and under-populated, or over-specialized and over-populated relative to the social optimum.

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File URL: http://www.accessecon.com/pubs/VUECON/vu00-w33.pdf
File Function: First version, 2000
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Bibliographic Info

Paper provided by Vanderbilt University Department of Economics in its series Vanderbilt University Department of Economics Working Papers with number 0033.

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Date of creation: Aug 2000
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Handle: RePEc:van:wpaper:0033

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Web page: http://www.vanderbilt.edu/econ/wparchive/index.html

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