Scandinavian Working Papers in Economics
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Department of Economics, Lund University Working Papers, Department of Economics, Lund University

No 2005:22:
Increasing Returns, Input-Output Linkages, and Technological Leapfrogging

Fredrik Gallo ()

Abstract: Firms agglomerate in one region due to increasing returns, input-output linkages and transportation costs. In the de-industrialised region factor prices are lower and a new technology may be profitable to adopt in that region instead, inducing a change in the technological leadership. This paper shows that the risk of locking in to an old technology is monotonically increasing in the benefits of agglomeration. Greater incompatibility between technologies also increases the risk of rejecting potentially superior manufacturing processes.

Keywords: agglomeration; lock-in; new economic geography; technological leapfrogging; (follow links to similar papers)

JEL-Codes: F12; F43; O33; (follow links to similar papers)

28 pages, March 11, 2005, Revised July 19, 2006

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This paper is published as:
Gallo, Fredrik, (2006), 'Increasing Returns, Input-Output Linkages, and Technological Leapfrogging', Topics in Economic Analysis & Policy, Vol. 6, No. 1

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