Innovation through intra and inter-regional interaction in economic geography
Abstract
We develop a two-region economic geography model with vertical innovations that improve the quality of manufactured varieties produced in each region. The chance of innovation depends on the \emph{related variety}, i.e. the importance of interaction between researchers within the same region rather than across different regions. As economic integration increases from a low level, a higher related variety is associated with more agglomerated spatial configurations. However, if the interaction with foreign scientists is relatively more important for innovation, economic activities may (completely) re-disperse after an initial phase of agglomeration due to the increase in the relative importance of a higher chance of innovation in the less industrialized region. This non-monotonic relationship between economic integration and spatial imbalances may exhibit very diverse qualitative properties, not yet described in the literature.
Keywords
Cite
@article{arxiv.2212.14475,
title = {Innovation through intra and inter-regional interaction in economic geography},
author = {José M. Gaspar and Minoru Osawa},
journal= {arXiv preprint arXiv:2212.14475},
year = {2024}
}