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CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology KTH/CESIS Working Paper Series in Economics and Institutions of Innovation

No 107:
R&D Accessibility and Comparative Advantages in Quality Differentiated Goods

Sara Johansson ()

Abstract: This paper analyzes the influences of human capital and technology transfers from R&D activities on regional export specialization along the range of product quality. Previous literature on specialization and trade in quality differentiated goods concludes that the production of high quality product varieties is intensive in knowledge and R&D. This study contributes to previous research by addressing the influence of spatial knowledge flows on the observed patterns of regional quality specialization. A theoretical model of endogenous quality choice derives regional comparative advantages to the presence of external knowledge flows from R&D activities. These knowledge transfers are modeled by accessibility variables, which deduce the presence of technology transfers from R&D activities to the geographical distribution of R&D activities and the observed patterns of spatial interaction. The impacts of regional R&D accessibility on regionsí revealed comparative advantages in high quality segments are subsequently examined in a two-dimensional cross-regional regression analysis. The results of this empirical work show significant positive effects of human capital and R&D accessibility on the revealed comparative advantages in production of high quality goods in Swedish regions. The empirical analysis also provides evidences of technology spillovers from abroad, as the presence of multinational firms increases the regionís specialization in high-quality segments. These results are robust over four different specifications of above-average product qualities. However, the sizes of estimated coefficients for R&D accessibility rises slightly with the quality level considered. This suggests that technological advantages becomes of larger importance the more superior are the levels of product quality considered.

Keywords: Product quality; vertical differentiation; Knowledge; Accessibility; Spatial dependence; comparative advantage; technology; (follow links to similar papers)

JEL-Codes: F12; F14; R12; R32; (follow links to similar papers)

26 pages, December 11, 2007

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