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Globalization, Industrial Policy and Clusters

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  • Forslid, Rikard
  • Ulltveit-Moe, Karen-Helene

Abstract

This Paper analyses industrial policy in a high wage open economy hosting an agglomeration consisting of vertically linked upstream and downstream firms. We show that optimal policy towards upstream industries typically differ from the optimal policy towards downstream industries. Internationalization impacts on the costs as well as on the benefits related to sustaining an industrial agglomeration. Whether maintaining the agglomeration is compatible with a welfare maximizing policy is shown to depend on level of economic integration.

Suggested Citation

  • Forslid, Rikard & Ulltveit-Moe, Karen-Helene, 2002. "Globalization, Industrial Policy and Clusters," CEPR Discussion Papers 3129, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:3129
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    References listed on IDEAS

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    1. Haaland, Jan I & Wooton, Ian, 1999. " International Competition for Multinational Investment," Scandinavian Journal of Economics, Wiley Blackwell, vol. 101(4), pages 631-649, December.
    2. Puga, Diego & Venables, Anthony J., 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," Journal of the Japanese and International Economies, Elsevier, vol. 10(4), pages 440-464, December.
    3. Kind, Hans Jarle & Knarvik, Karen Helene Midelfart & Schjelderup, Guttorm, 2000. "Competing for capital in a 'lumpy' world," Journal of Public Economics, Elsevier, vol. 78(3), pages 253-274, November.
    4. Paul Krugman & Anthony J. Venables, 1995. "Globalization and the Inequality of Nations," The Quarterly Journal of Economics, Oxford University Press, vol. 110(4), pages 857-880.
    5. Masahisa Fujita & Paul Krugman & Anthony J. Venables, 2001. "The Spatial Economy: Cities, Regions, and International Trade," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262561476, January.
    6. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    7. Ludema, Rodney D. & Wooton, Ian, 2000. "Economic geography and the fiscal effects of regional integration," Journal of International Economics, Elsevier, pages 331-357.
    8. repec:hhs:iuiwop:430 is not listed on IDEAS
    9. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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    11. Krugman, Paul & Venables, Anthony J, 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Lefilleur, Julien & Maurel, Mathilde, 2010. "Inter- and intra-industry linkages as a determinant of FDI in Central and Eastern Europe," Economic Systems, Elsevier, vol. 34(3), pages 309-330, September.

    More about this item

    Keywords

    economic geography; globalization; industrial clusters; industrial policy;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • F20 - International Economics - - International Factor Movements and International Business - - - General
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • R13 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General Equilibrium and Welfare Economic Analysis of Regional Economies

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