INDUSTRIAL AGGLOMERATION: ECONOMIC GEOGRAPHY, TECHNOLOGICAL SPILLOVER AND POLICY INCENTIVES

Emanuele Bracco

Rivista Internazionale di Scienze Sociali, 2014, vol. 122, issue 1, 3-18

Abstract: In a Marshallian Industrial District (MID) agglomeration of firms is triggered by the presence of specialized workforce in a concentrated area. Labour mobility across firms then generates knowledge spillover across firms, i.e. a positive location. This centripetal force is balanced by centrifugal forces like congestion costs and increased prices of specific factors caused by the increased local demand. On the other hand, the New Economic Geography (NEG) approach on firm location focuses on pecuniary advantages deriving from being clustered. This implies that a region is bound to have specific welfare advantages when an industrial cluster is located within it. Because of these advantages, there may be incentives for ‘‘industry grabbing’’ policies and tax competition between nations or regions. We analyse the case of policy incentives in a NEG framework with technological spillover to the R&D sector. In this framework subsidizing R&D in the industrial region may lead to welfare improvement.

Keywords: Industrial districts; Subsidy; New economic geography; Industrial cluster (search for similar items in EconPapers)
JEL-codes: O30 O38 R10 R12 (search for similar items in EconPapers)
Date: 2014
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Citations: View citations in EconPapers (1)

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