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Labour Pooling in R&D Intensive Industries

  • Gerlach, Heiko A.
  • Rønde, Thomas
  • Stahl, Konrad

We investigate firms' incentives to locate in the same region to gain access to a large pool of skilled labour. Firms engage in risky R&D activities and thus create stochastic product and implied labour demand. Agglomeration in a cluster is more likely in situations where the innovation step is large and the probability for a firm to be the only innovator is high. When firms cluster, they tend to invest more and take more risk in R&D compared to spatially dispersed firms. Agglomeration is welfare-maximizing, because expected labour productivity is higher and firms choose a more efficient, technically diversified portfolio of R&D projects at the industry level.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 5285.

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Date of creation: Nov 2005
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Handle: RePEc:cpr:ceprdp:5285
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  1. Sudipto Bhattacharya and Dilip Mookherhee., 1984. "Portfolio Choice in Research and Development," Research Program in Finance Working Papers 147, University of California at Berkeley.
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