INTERREGIONAL KNOWLEDGE SPILLOVERS AND OCCUPATIONAL CHOICE IN A MODEL OF FREE TRADE AND ENDOGENOUS GROWTH*

Colin Davis

Journal of Regional Science, 2009, vol. 49, issue 5, 855-876

Abstract: ABSTRACT A two region model of horizontal innovation with free trade and occupational choice is used to examine the spatial patterns of innovation and manufacturing industry in interior and core‐periphery long‐run equilibria. The inclusion of skill heterogeneity among workers creates a tension between stabilizing productivity effects that coincide with reallocations of workers across industries, and destabilizing productivity effects that arise with localized stocks of knowledge capital. We find that while core‐periphery equilibria are always saddlepath stable, interior equilibria are saddlepath stable when knowledge spillovers exceed a threshold level but are unstable otherwise. In addition, incorporating skill heterogeneity into the model allows for interior equilibria with asymmetric shares for innovation and industry.

Date: 2009
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jregsc:v:49:y:2009:i:5:p:855-876

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