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Localized technological externalities and the geographical distribution of firms

Author

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  • Giulio Bottazzi
  • Pietro Dindo

Abstract

Using an analytically solvable general equilibrium model, we study how the distribution of economic activities is affected by the trade-off between pecuniary externalities, as dependent on transportation costs, and localized technological externalities, as dependent on inter-regional spillovers. We model localized technological externalities as having a cost saving effect that can be interpreted as a technological advantage, like the presence of interfirms knowledge spillovers. Under the assumption of capital mobility and labour immobility, we show that whereas decreasing transportation costs, i.e. promoting market openness, leads to sudden agglomeration, increasing inter-regional spillovers, i.e. promoting technological openness, favors a smoother transition between different levels of firms concentration and ultimately leads to a less uneven distribution of welfare.

Suggested Citation

  • Giulio Bottazzi & Pietro Dindo, 2008. "Localized technological externalities and the geographical distribution of firms," LEM Papers Series 2008/11, Laboratory of Economics and Management (LEM), Sant'Anna School of Advanced Studies, Pisa, Italy.
  • Handle: RePEc:ssa:lemwps:2008/11
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    References listed on IDEAS

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    1. Martin, Philippe & I.P. Ottaviano, Gianmarco, 1999. "Growing locations: Industry location in a model of endogenous growth," European Economic Review, Elsevier, vol. 43(2), pages 281-302, February.
    2. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    3. Tibor Scitovsky, 1954. "Two Concepts of External Economies," Journal of Political Economy, University of Chicago Press, vol. 62, pages 143-143.
    4. Baldwin, Richard & Forslid, Rikard, 1997. "The Core-Periphery Model and Endogenous Growth," CEPR Discussion Papers 1749, C.E.P.R. Discussion Papers.
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    Citations

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    Cited by:

    1. Giulio Bottazzi & Pietro Dindo, 2010. "An Evolutionary Model of Firms’ Location with Technological Externalities," Chapters,in: The Handbook of Evolutionary Economic Geography, chapter 24 Edward Elgar Publishing.
    2. Christ, Julian P., 2009. "The geography and co-location of European technology-specific co-inventorship networks," Violette Reihe: Schriftenreihe des Promotionsschwerpunkts "Globalisierung und Beschäftigung" 31/2010, University of Hohenheim, Carl von Ossietzky University Oldenburg, Evangelisches Studienwerk.
    3. Ron Boschma & Ron Martin (ed.), 2010. "The Handbook of Evolutionary Economic Geography," Books, Edward Elgar Publishing, number 12864, April.

    More about this item

    Keywords

    New Economic Geography; Agglomeration; Footloose capital models; Technological externalities; Market and technological openness;

    JEL classification:

    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F15 - International Economics - - Trade - - - Economic Integration
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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