The Formation of Urban Centers under R\&D and Spillover Externalities
This paper proposes a model of urban agglomeration in conjunction with imperfect competition and endogenous product R\&D of firms. The quality of differentiated manufacturing goods is a result of R\&D services provided by research firms. Sectoral interactions are subject to spatially dependent transaction costs and (knowledge) spillover externalities. The paper analyzes the existence of fundamental city patterns with respect to R\&D intensity and the degree of localization in knowledge production. The model features three equilibrium formations: a monocentric, a mixed, and a perfectly integrated pattern, whereas the R\&D intensity always increases towards the city center. However, product quality and the corresponding R\&D expenditures of firms are not necessarily increasing with the city size; a result, which also renders decisive implications of local innovation policy.
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- Carlino, Gerald A. & Chatterjee, Satyajit & Hunt, Robert M., 2007.
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- Marcus Berliant & Robert R. Reed, III & Ping Wang, 2000. "Knowledge exchange, matching, and agglomeration," Discussion Paper / Institute for Empirical Macroeconomics 135, Federal Reserve Bank of Minneapolis.
- Marcus Berliant & Robert R. Reed III & Ping Wang, 2005. "Knowledge Exchange, Matching, and Agglomeration," Urban/Regional 0506013, EconWPA, revised 07 Jul 2005.
- Marcus Berliant & Robert R. Reed III & Ping Wang, 2000. "Knowledge Exchange, Matching, and Agglomeration," Econometric Society World Congress 2000 Contributed Papers 0261, Econometric Society.
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- Marcus Berliant & Shin-Kun Peng & Ping Wang, 2000.
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0011, Vanderbilt University Department of Economics.
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- Jan Kranich, 2007. "Too much R&D? - Vertical differentiation in a model of monopolistic competition," Working Paper Series in Economics 59, University of Lüneburg, Institute of Economics.
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