DP3129 Globalization, Industrial Policy and Clusters
|Author(s):||Rikard Forslid, Karen-Helene Ulltveit-Moe|
|Publication Date:||January 2002|
|Keyword(s):||economic geography, globalization, industrial clusters, industrial policy|
|JEL(s):||F12, F15, F20, H20, R13|
|Programme Areas:||International Trade and Regional Economics|
|Link to this Page:||cepr.org/active/publications/discussion_papers/dp.php?dpno=3129|
This Paper analyses industrial policy in a high wage open economy hosting an agglomeration consisting of vertically linked upstream and downstream firms. We show that optimal policy towards upstream industries typically differ from the optimal policy towards downstream industries. Internationalization impacts on the costs as well as on the benefits related to sustaining an industrial agglomeration. Whether maintaining the agglomeration is compatible with a welfare maximizing policy is shown to depend on level of economic integration.