Scandinavian Working Papers in Economics
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Department of Economics, Stockholm University Research Papers in Economics, Department of Economics, Stockholm University

No 2001:14:
Internalistation, Industrial Policy and Clusters

Rikard Forslid () and Karen Helene Midelfart Knarvik ()

Abstract: This paper analyses industrial policy in a high wage open economy hosting an agglomeration consisting of vertically linked upstream and downstream firms. Optimal policy towards upstream and downstream industries differ radically in this setting. However the restriction that the agglomeration should be sustained may restrict the otherwise welfare maximising policy.

Keywords: agglomeration; clusters; taxes; (follow links to similar papers)

JEL-Codes: F12; F15; F21; R12; (follow links to similar papers)

27 pages, December 17, 2001

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