Discussion Paper Details

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Title: Labour Pooling in R&D Intensive Industries

Author(s): Heiko A. Gerlach, Thomas Rønde and Konrad O Stahl

Publication Date: November 2005

Keyword(s): agglomeration, labour pooling and R&D

Programme Area(s): Industrial Organization and International Trade and Regional Economics

Abstract: We investigate firms' incentives to locate in the same region to gain access to a large pool of skilled labour. Firms engage in risky R&D activities and thus create stochastic product and implied labour demand. Agglomeration in a cluster is more likely in situations where the innovation step is large and the probability for a firm to be the only innovator is high. When firms cluster, they tend to invest more and take more risk in R&D compared to spatially dispersed firms. Agglomeration is welfare-maximizing, because expected labour productivity is higher and firms choose a more efficient, technically diversified portfolio of R&D projects at the industry level.

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Bibliographic Reference

Gerlach, H, Rønde, T and Stahl, K. 2005. 'Labour Pooling in R&D Intensive Industries'. London, Centre for Economic Policy Research.