Industry Concentration, Knowledge Diffusion, and Economic Growth Without Scale Effects

Colin Davis and Ken-ichi Hashimoto

No 1408, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: This paper develops a two region model of trade to study the relationship between geographic patterns of industry and economic growth without scale effects. With transport costs, imperfect knowledge diffusion, and perfect capital mobility, firms locate production, process innovation, and product development independently in their lowest cost regions, leading to the partial concentration of production and the full agglomeration of innovation in the region with the largest market. A rise in industry concentration increases knowledge spillovers from production to innovation, resulting in a fall or a rise in the level of market entry depending on whether productivity increases more for process innovation or for product development. As a result, the rate of economic growth may rise or fall, depending on the effects of industry concentration on market entry.

Keywords: Industry Concentration; Industry Share; Knowledge Diffusion; Productivity Growth; Scale Effect (search for similar items in EconPapers)
JEL-codes: F43 O30 O40 R12 (search for similar items in EconPapers)
Pages: 30pages
Date: 2014-02
New Economics Papers: this item is included in nep-cse, nep-fdg, nep-geo, nep-gro, nep-ino, nep-knm and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Journal Article: Industry Concentration, Knowledge Diffusion and Economic Growth Without Scale Effects (2015)
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