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Productivity Growth and Patterns of Industry Location Without Scale Effects

Author

Listed:
  • Colin Davis

    () (Institute for International Education, Doshisha University)

  • Ken-ichi Hashimoto

    () (Graduate School of Economics, Kobe University)

Abstract

This paper investigates the relationship between geographic patterns of economic activity and productivity growth in a two region model of trade and endogenous growth without scale effects. At the core of the model is the production and in-house innovation activities of manufacturing firms and, in a world of transport costs, imperfect knowledge dispersion and perfect capital mobility, these activities are located independently in the region that provides the lowest associated cost. In contrast to the existing literature, we remove scale effects by shifting the focus from aggregate research and development activity to innovation at the level of individual product lines and find that although industry concentration raises the level of product variety, it reduces the rate of productivity growth so that the pace of economic growth is highest when industry is equally dispersed across regions. We also study the effects of greater economic integration between regions and find that increases in the freeness of trade and the level of knowledge dispersion both have negative effects on productivity growth while raising the level of product variety. These opposing effects for growth and product variety lead to mixed results for the impacts of economic integration on regional welfare.

Suggested Citation

  • Colin Davis & Ken-ichi Hashimoto, 2011. "Productivity Growth and Patterns of Industry Location Without Scale Effects," Discussion Papers 1107, Graduate School of Economics, Kobe University.
  • Handle: RePEc:koe:wpaper:1107
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    File URL: http://www.econ.kobe-u.ac.jp/RePEc/koe/wpaper/2011/1107.pdf
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    More about this item

    Keywords

    Industry Concentration; Industry Share; Productivity Growth; Scale Effect;

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • 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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