The Formation of Urban Centers under R\&D and Spillover Externalities

Jan Kranich

Hannover Economic Papers (HEP) from Leibniz Universität Hannover, Wirtschaftswissenschaftliche Fakultät

Abstract: This paper proposes a model of urban agglomeration in conjunction with imperfect competition and endogenous product R\&D of firms. The quality of differentiated manufacturing goods is a result of R\&D services provided by research firms. Sectoral interactions are subject to spatially dependent transaction costs and (knowledge) spillover externalities. The paper analyzes the existence of fundamental city patterns with respect to R\&D intensity and the degree of localization in knowledge production. The model features three equilibrium formations: a monocentric, a mixed, and a perfectly integrated pattern, whereas the R\&D intensity always increases towards the city center. However, product quality and the corresponding R\&D expenditures of firms are not necessarily increasing with the city size; a result, which also renders decisive implications of local innovation policy.

Keywords: Bid-rent; Land Use; R\&D; Externalities (search for similar items in EconPapers)
JEL-codes: R1 R14 (search for similar items in EconPapers)
Pages: 37 pages
Date: 2009-09
New Economics Papers: this item is included in nep-geo, nep-ino and nep-ure
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Persistent link: https://EconPapers.repec.org/RePEc:han:dpaper:dp-430

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