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GLOBALIZING KNOWLEDGE: HOW TECHNOLOGICAL OPENNESS AFFECTS OUTPUT, SPATIAL INEQUALITY, AND WELFARE LEVELS

Authors


  • We are grateful to Giovanni Dosi, Francesco Lissoni, Steven Brakman, and two anonymous referees for many useful suggestions. We also thank the participants of the DIMETIC Summer School “Geography of Innovation and Growth,” Pecs, Hungary; of the First DIME Scientific Conference, Strasbourg and of the Final DIME Scientific Conference, Maastricht. The research that has led to this work has been supported by the EU FP6 STREP Project CO3 “Common Complex Collective Phenomena in Statistical Mechanics, Society, Economics, and Biology,” by the European Union NoE DIME, and by MIUR, PROT. 2007HA3S72-003, PRIN 2007. All usual disclaimers apply. Previous versions of this work have circulated under the title “Localized technological externalities and the geographical distribution of firms.”

ABSTRACT

Using an analytically solvable model, we study how the spatial distribution of economic activities and the ensuing welfare levels are affected by pecuniary externalities, depending on transportation costs, and localized technological externalities, due to the cost saving effect of intra- and interregional knowledge spillovers. Under the assumption of capital mobility and labor immobility, we show that increasing interregional knowledge spillovers, i.e., promoting technological openness, favors a smoother transition between different levels of firms concentration, makes trade globalization less likely to generate catastrophic and irreversible agglomeration, and ultimately leads to a less uneven distribution of welfare.

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