Increasing Returns, Input-Output Linkages, and Technological Leapfrogging
Firms agglomerate in one region due to increasing returns, input-output linkages and transportation costs. In the de-industrialised region factor prices are lower and a new technology may be profitable to adopt in that region instead, inducing a change in the technological leadership. This paper shows that the risk of locking in to an old technology is monotonically increasing in the benefits of agglomeration. Greater incompatibility between technologies also increases the risk of rejecting potentially superior manufacturing processes.
|Date of creation:||11 Mar 2005|
|Date of revision:||19 Jul 2006|
|Publication status:||Published in Topics in Economic Analysis & Policy, 2006.|
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