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Labor Pooling in R&D Intensive Industries

  • Heiko A. Gerlach

    (University of Auckland)

  • Thomas Rønde

    (Department of Economics, University of Copenhagen)

  • Konrad Stahl

    (University of Mannheim)

We investigate firms’ incentives to locate in the same region to gain access to a large pool of skilled labor. Firms engage in risky R&D activities and thus create stochastic product and implied labor demand. Agglomeration in a cluster is more likely in situations where the innovation step is large and the probability for a firm to be the only innovator is high. When firms cluster, they tend to invest more and take more risk in R&D compared to spatially dispersed firms. Agglomeration is welfare maximizing, because expected labor productivity is higher and firms choose a more efficient, technically diversified portfolio of R&D projects at the industry level.

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Paper provided by University of Copenhagen. Department of Economics. Centre for Industrial Economics in its series CIE Discussion Papers with number 2005-01.

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Length: 27 pages
Date of creation: Sep 2005
Date of revision:
Handle: RePEc:kud:kuieci:2005-01
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