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Industry Concentration, Knowledge Diffusion and Economic Growth Without Scale Effects
Author(s) -
Davis Colin,
Hashimoto KenIchi
Publication year - 2015
Publication title -
economica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.532
H-Index - 65
eISSN - 1468-0335
pISSN - 0013-0427
DOI - 10.1111/ecca.12129
Subject(s) - economies of agglomeration , production (economics) , productivity , industrial organization , imperfect , product innovation , scale (ratio) , diffusion , business , product (mathematics) , economic geography , economies of scale , economics , microeconomics , economic growth , linguistics , philosophy , physics , geometry , mathematics , quantum mechanics , thermodynamics
This paper studies the relationship between geographic patterns of industry and economic growth without scale effects. Facing transport costs and imperfect knowledge diffusion, firms locate production, process innovation and product development in their lowest cost regions, leading to the partial concentration of production and full agglomeration of innovation in the region with the largest market. An increase in industry concentration raises knowledge spillovers from production to innovation, causing a fall (rise) in market entry, if labour productivity improves more for process innovation (product development). The rate of economic growth rises or falls, depending on how industry concentration affects market entry.