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Globalization, Industrial Policy and Clusters

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

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.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 3129.

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Date of creation: Jan 2002
Date of revision:
Handle: RePEc:cpr:ceprdp:3129
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  1. Baldwin, Richard E. & Krugman, Paul, 2004. "Agglomeration, integration and tax harmonisation," European Economic Review, Elsevier, vol. 48(1), pages 1-23, February.
  2. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  3. Diego Puga, 1996. "The Spread of Industry: Spatial Agglomeration in Economic Development," CEP Discussion Papers dp0279, Centre for Economic Performance, LSE.
  4. Rodney D. Ludema & Ian Wooton, 1998. "Economic Geography and the Fiscal Effects of Regional Integration," Working Papers 9809, Business School - Economics, University of Glasgow.
  5. Kind, H.J. & Knarvik, K.H.M. & Schjelderup, G., 1999. "Competing for Capital in a "Lumpy" World," Papers 7/99, Norwegian School of Economics and Business Administration-.
  6. Krugman, Paul & Venables, Anthony J., 1995. "Globalization and the Inequality of Nations," Working Paper Series 430, Research Institute of Industrial Economics.
  7. Haaland, J.I. & Wooton, I., 1998. "International Competition for Multinational Investment," Papers 14/98, Norwegian School of Economics and Business Administration-.
  8. Krugman, Paul & Venables, Anthony J, 1990. "Integration and the Competitiveness of Peripheral Industry," CEPR Discussion Papers 363, C.E.P.R. Discussion Papers.
  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.
  10. 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, June.
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