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Title: Location of R&D and High-Tech Production by Vertically-Integrated Multinationals

Author(s): Karolina Ekholm and Katariina Hakkala

Publication Date: October 2003

Keyword(s): agglomeration economies, high-tech production, monopolistic competition and R&D

Programme Area(s): International Trade and Regional Economics

Abstract: We develop a two-country general equilibrium model where firms make separate choices about the location of R&D and high-tech production. There are two agglomeration forces: R&D spillovers and backward linkages associated with high-tech production. The latter tends to attract production to the larger economy. We show that, for relatively weak R&D spillovers and intermediate trade costs, the smaller economy tends to specialize in R&D. For certain parameterizations, both concentration and dispersion of R&D activities are possible outcomes. Hosting an agglomeration of R&D activities does not necessarily lead to welfare gains.

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Bibliographic Reference

Ekholm, K and Hakkala, K. 2003. 'Location of R&D and High-Tech Production by Vertically-Integrated Multinationals'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=4078