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Knowledge spillovers and the equilibrium location of vertically linked industries : the return of the black hole

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  • Sylvain Barde

    () (OFCE - OFCE - Sciences Po)

Abstract

Using a generalised version of the Venables (1996) model, this paper explores the relative locations of two vertically linked sectors with knowledge spillovers. Analytical investigation shows that the dynamic properties of the Venables model are significantly affected by the presence of spillovers. In particular, the own-cost reduction effects at low transport costs can be so strong that runaway agglomeration phenomenon appears in a manner consistent with the "black hole" concept found in the literature. However, the assumption that because information decays over space means that these black hole dynamics are endogenous to the model and disappear when transport costs are high enough. Importantly, the location predictions obtained in simulations of the model are consistent with the empirical finding that industrials sector that benefit from spillovers are typically more agglomerated than sector that do not benefit from such spillovers.

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  • Sylvain Barde, 2008. "Knowledge spillovers and the equilibrium location of vertically linked industries : the return of the black hole," Working Papers hal-01066128, HAL.
  • Handle: RePEc:hal:wpaper:hal-01066128
    Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01066128
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    References listed on IDEAS

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    1. Combes, Pierre-Philippe & Duranton, Gilles, 2006. "Labour pooling, labour poaching, and spatial clustering," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 1-28, January.
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    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • 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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