Labor pooling in R&D intensive industries

Heiko Gerlach, Thomas Rønde and Konrad Stahl

Journal of Urban Economics, 2009, vol. 65, issue 1, 99-111

Abstract: We investigate the interplay between firms' R&D decisions and local labor market competition and how this influences equilibrium location choices and welfare. Firms engage in risky R&D activities that generate stochastic product and derived labor demand. We show that firms located in a cluster tend to invest more and take more risk in R&D compared to spatially separated firms. Most interestingly, ex-ante symmetric firms choose asymmetric R&D investments when located in a cluster. This creates an additional welfare benefit from agglomeration, because firms choose a more efficient, diversified portfolio of R&D projects at the industry level.

Date: 2009
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Related works:
Working Paper: Labour Pooling in R&D Intensive Industries (2005)
Working Paper: Labor Pooling in R&D Intensive Industries (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:juecon:v:65:y:2009:i:1:p:99-111

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