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The District and the Global Economy: Exporting versus Foreign Location


  • Basevi, Giorgio
  • Ottaviano, Gianmarco


This Paper studies the welfare implications of the location decisions of innovative newcomers that, though spinning off an industrial district, may choose whether to locate inside or outside its borders. Even if this choice has always been relevant, globalization has turned the issue, whether to locate inside or outside the district, from an intra- to an inter-national issue. The fear is delocation, that is, the implosion of the district due to the flight of innovative newcomers to distant locations. This negative effect could offset the benefits that the district reaps both in terms of cost reduction through foreign production in low wage countries and in terms of access to new markets. We address these issues by depicting the industrial district as a centre of innovation where positive local spillovers sustain the endogenous invention of new goods by profit-seeking firms. After invention firms face a crucial choice between reaching distant markets by export or plant delocation. By focusing on market-seeking rather than cost-reducing location choices, we argue that, by the very nature of the district, the equilibrium distribution of firms is bound to be inefficient from the point of view of the district as a whole. In particular, firms’ attempts to circumvent trade barriers through delocation slow down the pace of innovation and harm the welfare of the district.

Suggested Citation

  • Basevi, Giorgio & Ottaviano, Gianmarco, 2001. "The District and the Global Economy: Exporting versus Foreign Location," CEPR Discussion Papers 2976, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:2976

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    References listed on IDEAS

    1. Conti Giuliano & Menghinello Stefano, 1998. "Modelli di impresa e di industria nei contesti di competizione globale: l'internazionalizzazione produttiva dei sistemi locali del made in Italy," L'industria, Società editrice il Mulino, issue 2, pages 315-348.
    2. Soubeyran, Antoine & Thisse, Jacques-Francois, 1999. "Learning-by-Doing and the Development of Industrial Districts," Journal of Urban Economics, Elsevier, vol. 45(1), pages 156-176, January.
    3. David J. Teece, 2008. "Technology Transfer By Multinational Firms: The Resource Cost Of Transferring Technological Know-How," World Scientific Book Chapters,in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 1, pages 1-22 World Scientific Publishing Co. Pte. Ltd..
    4. James D Adams & Adam B Jaffe, 1994. "The Span of the Effect of R&D in the Firm and Industry," Working Papers 94-7, Center for Economic Studies, U.S. Census Bureau.
    5. Irwin, Douglas A & Klenow, Peter J, 1994. "Learning-by-Doing Spillovers in the Semiconductor Industry," Journal of Political Economy, University of Chicago Press, vol. 102(6), pages 1200-1227, December.
    6. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9780521171960, March.
    7. James Love & Stephen Roper, 1999. "The Determinants of Innovation: R & D, Technology Transfer and Networking Effects," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 15(1), pages 43-64, August.
    8. Walz, Uwe, 1996. "Transport costs, intermediate goods, and localized growth," Regional Science and Urban Economics, Elsevier, vol. 26(6), pages 671-695, December.
    9. Martin, Philippe & I.P. Ottaviano, Gianmarco, 1999. "Growing locations: Industry location in a model of endogenous growth," European Economic Review, Elsevier, vol. 43(2), pages 281-302, February.
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    Cited by:

    1. Alessandra Cassar & Rosella Nicolini, 2003. "Spillovers and growth in a local interaction model," UFAE and IAE Working Papers 574.03, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC).
    2. Stefano Federico & Gaetano Alfredo Minerva, 2005. "Fear of Relocation? Assessing the Impact of Italy’s FDI on Local Employment," Working Papers 102, SEMEQ Department - Faculty of Economics - University of Eastern Piedmont.

    More about this item


    delocation; fixed exchange rates; industrial district; regional development; stabilization;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)


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