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Location of R&D and High-Tech Production by Vertically Integrated Multinationals

  • Ekholm, Karolina

    ()

    (Dept. of Economics, Stockholm School of Economics)

  • Hakkala, Katariina

    ()

    (Dept. of Economics, Stockholm School of Economics)

We develop a two-country general equilibrium model where firms make separate choices about the location of R&D and high-tech production. There are two agglomeration forces: R&D spillovers and backward linkages associated with high-tech production. The latter tends to attract production to the larger economy. We show that, for relatively weak R&D spillovers and intermediate trade costs, the smaller economy tends to specialize in R&D. For certain parameterizations, both concentration and dispersion of R&D activities are possible outcomes. Hosting an agglomeration of R&D activities does not necessarily lead to welfare gains.

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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 538.

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Length: 41 pages
Date of creation: 07 Oct 2003
Date of revision:
Handle: RePEc:hhs:hastef:0538
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