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Journal of Regional Science
ISSN : 0022-4146

Complementarity Between Local Knowledge and Internationalization in Regional Technological Progress


Enrique Lopez-Ba | AQR Research Group |
Francisco Requena | University of Valencia |
Guadalupe Serrano | University of Valencia |

Vol.46 No.4 , pp.901 ~ 929


We investigate how cross-country differences in firms' fixed set-up costs affect the trade-off between global efficiency and spatial equity. Our analysis reveals that the standard assumption of symmetry in set-up costs masks the existence of an interesting effect: the range of available varieties depends on the spatial distribution of firms. In such a setting, where the market outcome leads to excessive agglomeration in the symmetric case, a planner may opt for asymmetric set-up costs and even more agglomeration. We show that the planner will always favor lower set-up costs in the large country with more agglomeration when the consumer's marginal preference for variety is high, or with less agglomeration when the consumer's marginal preference for variety is low.


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