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|
|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.