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Knowledge spillovers, location of industry, and endogenous growth

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  • Kyoko Hirose
  • Kazuhiro Yamamoto

Abstract

A Grossman-Helpman-Romer-type endogenous-growth model is developed in this study. This model has two countries in which there are knowledge spillovers that are partially local. Owing to these spillovers, innovation cost in a particular country decreases as the number of firms locating in both that country and the other country increases. If international knowledge spillovers are symmetric, innovation cost is lower in the country that has the larger market. However, if a small-market country can absorb the international knowledge spillovers better than a large-market country, the innovation cost may be lower in the small-market country. When the innovation cost is lower in the country that has a large market, the growth rate increases with agglomeration, which is generated by a reduction in the transportation costs. However, when the innovation cost is lower in the country that has a small market, the growth rate decreases with the reduction in the transportation costs.
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Suggested Citation

  • Kyoko Hirose & Kazuhiro Yamamoto, 2007. "Knowledge spillovers, location of industry, and endogenous growth," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(1), pages 17-30, March.
    • Handle: RePEc:spr:anresc:v:41:y:2007:i:1:p:17-30
    DOI: 10.1007/s00168-006-0082-6
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    1. Coe, David T. & Helpman, Elhanan, 1995. "International R&D spillovers," European Economic Review, Elsevier, vol. 39(5), pages 859-887, May.
    2. Philippe Martin & Gianmarco I.P. Ottaviano, 2021. "Growing locations: Industry location in a model of endogenous growth," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 1, pages 3-24, World Scientific Publishing Co. Pte. Ltd..
    3. Barro, Robert J & Sala-i-Martin, Xavier, 1997. "Technological Diffusion, Convergence, and Growth," Journal of Economic Growth, Springer, vol. 2(1), pages 1-26, March.
    4. Richard E. Baldwin & Philippe Martin & Gianmarco I. P. Ottaviano, 2021. "Global Income Divergence, Trade, and Industrialization: The Geography of Growth Take-Offs," World Scientific Book Chapters, in: Firms and Workers in a Globalized World Larger Markets, Tougher Competition, chapter 2, pages 25-57, World Scientific Publishing Co. Pte. Ltd..
    5. Baldwin, Richard E., 1999. "Agglomeration and endogenous capital," European Economic Review, Elsevier, vol. 43(2), pages 253-280, February.
    6. Eaton, Jonathan & Kortum, Samuel, 1996. "Trade in ideas Patenting and productivity in the OECD," Journal of International Economics, Elsevier, vol. 40(3-4), pages 251-278, May.
    7. Yamamoto, Kazuhiro, 2003. "Agglomeration and growth with innovation in the intermediate goods sector," Regional Science and Urban Economics, Elsevier, vol. 33(3), pages 335-360, May.
    8. Martin, Philippe, 1999. "Public policies, regional inequalities and growth," Journal of Public Economics, Elsevier, vol. 73(1), pages 85-105, July.
    9. Masahisa Fujita & Jacques‐François Thisse, 2003. "Does Geographical Agglomeration Foster Economic Growth? And Who Gains and Loses from It?," The Japanese Economic Review, Japanese Economic Association, vol. 54(2), pages 121-145, June.
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    Cited by:

    1. Arauzo Carod, Josep Maria & Faggian, Alessandra & Mañé Vernet, Ferran, 2010. "Internal and External Determinants of Radical and incremental Innovation in SMEs: the case of Catalonia," Working Papers 2072/179605, Universitat Rovira i Virgili, Department of Economics.
    2. Akinori Tanaka & Kazuhiro Yamamoto, 2013. "Trade costs, wage difference, and endogenous growth," Papers in Regional Science, Wiley Blackwell, vol. 92(4), pages 831-850, November.
    3. González-Val, Rafael & Pueyo, Fernando, 2009. "First Nature vs. Second Nature Causes: Industry Location and Growth in the Presence of an Open-Access Renewable Resource," MPRA Paper 18586, University Library of Munich, Germany.
    4. Karima Kourtit & Peter Nijkamp, 2013. "In Search of Creative Champions in High-Tech Spaces," Tinbergen Institute Discussion Papers 13-193/VIII, Tinbergen Institute.
    5. González-Val, Rafael & Lanaspa, Luis & Pueyo, Fernando, 2009. "Trade policies, concentration, growth and welfare," Economic Modelling, Elsevier, vol. 26(6), pages 1355-1364, November.
    6. González-Val, Rafael & Pueyo, Fernando, 2019. "Natural resources, economic growth and geography," Economic Modelling, Elsevier, vol. 83(C), pages 150-159.
    7. Steven Bond-Smith, 2012. "A Regional Model of Endogenous Growth with Creative Destruction," Working Papers in Economics 12/02, University of Waikato.
    8. Maldonado Rojo, Mauricio & Noronha, Teresa, 2016. "Low-Technology Industries And Regional Innovation Systems: The Salmon Industry In Chile," Journal of Tourism, Sustainability and Well-being, Cinturs - Research Centre for Tourism, Sustainability and Well-being, University of Algarve, vol. 4(4), pages 314-329.

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    More about this item

    Keywords

    F43; O30; R12;
    All these keywords.

    JEL classification:

    • F43 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Economic Growth of Open Economies
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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