SSE/EFI Working Paper Series in Economics and Finance
No 538:
Location of R&D and High-Tech Production by Vertically Integrated Multinationals
Karolina Ekholm ()
and Katariina Hakkala ()
Abstract: We develop a two-country general equilibrium model where
firms make separate choices about the location of R&D and high-tech
production. There are two agglomeration forces: R&D spillovers and backward
linkages associated with high-tech production. The latter tends to attract
production to the larger economy. We show that, for relatively weak R&D
spillovers and intermediate trade costs, the smaller economy tends to
specialize in R&D. For certain parameterizations, both concentration and
dispersion of R&D activities are possible outcomes. Hosting an
agglomeration of R&D activities does not necessarily lead to welfare
gains.
Keywords: monopolistic competition; R&D; high-tech production; agglomeration economies; (follow links to similar papers)
JEL-Codes: F12; F23; (follow links to similar papers)
41 pages, October 7, 2003
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