Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/226229
Authors: 
Kichko, Sergey
Liang, Wen-Jung
Mai, Chao-Cheng
Thisse, Jacques-Francois
Wang, Ping
Year of Publication: 
2020
Series/Report no.: 
CESifo Working Paper No. 8527
Abstract: 
Tech clusters play a growing role in knowledge-based economies by accommodating high-tech firms and providing an environment that fosters location-dependent knowledge spillovers and promote R&D investments by .rms. Yet, not much is known about the economic conditions under which such entities may form in equilibrium without government interventions. This paper develops a spatial equilibrium model with a competitive final sector and a monopolistically competitive intermediate sector, which allows us to determine necessary and sufficient conditions for a tech cluster to emerge as an equilibrium outcome. We show that strongly localized knowledge spillovers, skilled labor abundance, and low commuting costs are key drivers for a tech cluster to form. Not only is the productivity of the final sector higher when intermediate firms cluster, but a tech cluster hosts more intermediate firms and more R&D and production activities, and yields greater worker welfare, compared to what a dispersed pattern would generate. With continual improvements in infrastructure and communication technology that lowers coordination costs, tech clusters will eventually be fragmented.
Subjects: 
high-tech city
knowledge spillovers
intermediate firm clustering
land use
commuting
R&D
JEL: 
D51
L22
O33
R13
Document Type: 
Working Paper

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