DP4078 Location of R&D and High-Tech Production by Vertically-Integrated Multinationals
Author(s): | Karolina Ekholm, Katariina Hakkala |
Publication Date: | October 2003 |
Keyword(s): | agglomeration economies, high-tech production, monopolistic competition, R&D |
JEL(s): | F12, F23 |
Programme Areas: | International Trade and Regional Economics |
Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=4078 |
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.