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Knowledge spillovers, location of industry, and endogenous growth

  • Kyoko Hirose


    (Graduate School of Economics, Osaka University)

  • Kazuhiro Yamamoto


    (Graduate School of Economics, Osaka University)

A Grossman-Helpman-Romer-type endogenous-growth model is developed in this study. This model has two countries in which there are knowledge spillovers that are partially local. Owing to these spillovers, innovation cost in a particular country decreases as the number of firms locating in both that country and the other country increases. If international knowledge spillovers are symmetric, innovation cost is lower in the country that has the larger market. However, if a small-market country can absorb the international knowledge spillovers better than a large-market country, the innovation cost may be lower in the small-market country. When the innovation cost is lower in the country that has a large market, the growth rate increases with agglomeration, which is generated by a reduction in the transportation costs. However, when the innovation cost is lower in the country that has a small market, the growth rate decreases with the reduction in the transportation costs.

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Paper provided by Osaka University, Graduate School of Economics and Osaka School of International Public Policy (OSIPP) in its series Discussion Papers in Economics and Business with number 05-15.

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Length: 30 pages
Date of creation: Jun 2005
Date of revision:
Handle: RePEc:osk:wpaper:0515
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  1. Barro, Robert J. & Sala-i-Martin, Xavier, 1995. "Technological Diffusion, Convergence and Growth," CEPR Discussion Papers 1255, C.E.P.R. Discussion Papers.
  2. Paul M Romer, 1999. "Endogenous Technological Change," Levine's Working Paper Archive 2135, David K. Levine.
  3. Fujita, Masahisa & Thisse, Jacques-François, 2002. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Looses From It?," CEPR Discussion Papers 3135, C.E.P.R. Discussion Papers.
  4. Samuel S. Kortum & Jonathan Eaton, 1995. "Trade in ideas: patenting and productivity in the OECD," Finance and Economics Discussion Series 95-9, Board of Governors of the Federal Reserve System (U.S.).
  5. Baldwin, Richard, 1998. "Agglomeration and Endogenous Capital," CEPR Discussion Papers 1845, C.E.P.R. Discussion Papers.
  6. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
  7. Martin, Philippe & Ottaviano, Gianmarco, 1996. "Growing Locations: Industry Location in a Model of Endogenous Growth," CEPR Discussion Papers 1523, C.E.P.R. Discussion Papers.
  8. Baldwin, Richard E & Martin, Philippe & Ottaviano, Gianmarco I P, 2001. " Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs," Journal of Economic Growth, Springer, vol. 6(1), pages 5-37, March.
  9. Yamamoto, Kazuhiro, 2003. "Agglomeration and growth with innovation in the intermediate goods sector," Regional Science and Urban Economics, Elsevier, vol. 33(3), pages 335-360, May.
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