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Knowledge spillovers and the equilibrium location of vertically linked industries: the return of the black hole

Sylvain Barde ()

Working Papers from HAL

Abstract: Using a generalised version of the Venables (1996) model, this paper explores the relative locations of two vertically linked sectors with knowledge spillovers. Analytical investigation shows that the dynamic properties of the Venables model are significantly affected by the presence of spillovers. In particular, the own-cost reduction effects at low transport costs can be so strong that runaway agglomeration phenomenon appears in a manner consistent with the "black hole" concept found in the literature. However, the assumption that because information decays over space means that these black hole dynamics are endogenous to the model and disappear when transport costs are high enough. Importantly, the location predictions obtained in simulations of the model are consistent with the empirical finding that industrials sector that benefit from spillovers are typically more agglomerated than sector that do not benefit from such spillovers.

Date: 2008-02
Note: View the original document on HAL open archive server: https://hal-sciencespo.archives-ouvertes.fr/hal-01066128
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Working Paper: Knowledge spillovers and the equilibrium location of vertically linked industries: the return of the black hole (2008) Downloads
Working Paper: Knowledge spillovers and the equilibrium location of vertically linked industries: the return of the black hole (2008) Downloads
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