Technology, Agglomeration, and Regional Competition for Investment

Bruce A. Blonigen () and Van Kolpin ()
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Bruce A. Blonigen: University of Oregon Economics Department
Van Kolpin: University of Oregon Economics Department

University of Oregon Economics Department Working Papers from University of Oregon Economics Department

Abstract: The active "courting" of firms by municipalities, regions, and even nations has a long-standing history and the competition for firm location through a wide variety of incentives seems to have escalated to new heights in recent years. We develop a model that explores technology development by firms that face regional competition for their investment and examine the endogenous determination of regions’ policies, firm technology, and agglomeration externalities. In particular, we find that regional competition leads firms to inefficiently distort their research and development efforts in hopes of improving their standing in the competition amongst regions for their investment. This loss in efficiency is aggravated by the agglomeration externalities that are inherently present in many industries. We offer several case studies that provide evidence consistent with our theoretical conclusions.

JEL-codes: H71 L23 D21 O31 (search for similar items in EconPapers)
Date: 2001-06-01
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