Localised knowledge spillovers vs. innovative milieux: Knowledge “tacitness” reconsidered

Abstract. This article provides a critical discussion of the recent econometric literature on "localised knowledge spillovers" and the related notion of tacit knowledge. The basic claim of the article is that the increasing, and more or less automatic reliance of industrial geographers upon such econometric evidence and theoretical concepts to support their work on industrial districts, hi-tech agglomerations and, more broadly, local innovation systems is not well placed and risks to generate conceptual confusion and to distort research agendas. Following some recent advances in the economics of knowledge, the article also suggests that more research efforts should instead be devoted to exploring how knowledge is actually transmitted, among whom, at what distance, and on the basis of which codebooks.     

An equation by any other name is still the same: on spatial econometrics and spatial statistics

Statistics is a branch of mathematics concerned with the collection, quantification, analysis, interpretation, and presentation of real-world data, and the use of probability theory to estimate population parameters with these data. Spatial statistics is a subset of statistics that is concerned with handling the special problems associated with geographically distributed data, which include spatial point patterns, regional and lattice measurement aggregations, irregularly spaced site-specific measurements on a surface, and image analysis. Meanwhile, econometrics is concerned with the application of statistical methods to the study of economic data and problems. When coining the term spatial econometrics in 1979, Paelinck and Klaassen characterized it as a subset of econometrics that is concerned with the role of spatial dependence in regional economic model response and explanatory variables, asymmetries in spatial relationships, the specification of geographic structure governing spatial interactions, and the explicit modeling of space. We outline and discuss principal similarities (e.g., testing for the presence of spatial autocorrelation) and differences (e.g., map generalization) between spatial statistics and spatial econometrics. In doing so, our goal is to help clarify past, present, and future relationships between these two subfields.     

Agglomeration and spillovers in a simultaneous framework

Previous studies have emphasized reduced transaction costs, knowledge spillovers, diverse intermediate goods suppliers, and deep labor pools as possible drivers of firm agglomeration. Among these candidates, knowledge spillovers lie at the heart of discussions in the literature. If knowledge spillovers are so important, it follows that firms tend to locate in proximity to capitalize on the knowledge stock in neighboring firms. Therefore, agglomeration and spillovers reinforce each other. However, most existing empirical studies ignore the potential endogenous relationship between the two. Moreover, few studies have even attempted to measure knowledge spillovers. In this paper, I address both issues by developing and estimating a simultaneous equation model of agglomeration and knowledge spillovers. The results suggest that traditional single equation models do indeed suffer endogeneity and that the accuracy of the estimation can be substantially improved by employing a simultaneous system.Received: June 2003/Accepted: March 2004The author gratefully acknowledges valuable comments and constant encouragement from Edward Feser.     

The agglomeration of U.S.-owned and foreign-owned plants across the U.S. States

Agglomeration in U.S. manufacturing is more common than initially thought. This clustering arises from location natural advantages and spillovers. Extant studies on agglomeration do not distinguish the activities of U.S.-owned plants from those that are foreign owned. This distinction is crucial since policies seem to have differential impacts on both types of plants. I find that industry scale, resource intensity and urbanization economies have larger impacts on foreign plant agglomeration whereas knowledge intensity has a larger effect on domestic plant agglomeration. Received: September 2001/Accepted: April 2002 I would like to thank the UNO University Committee on Research for support of this project and Ke Yang for invaluable research assistance. The paper has benefited from the comments made by an anonymous referee. The usual caveats apply.     

Knowledge–capital meets new economic geography

This paper introduces multinational firms in a new economic geography model. There, unskilled labor mobility leads to less concentration of production than skilled labor mobility does. This is in line with empirical evidence that agglomeration of production in Europe is less pronounced than in the United States. The different patterns in (skilled versus unskilled) labor mobility together with the presence of multinational firms form one explanation of the actual differences in the spreading of industries in Europe as compared to the US     

Foreign direct investment,industrial location and capital taxation

This paper demonstrates from a theoretical point of view that governments can affect the location decision of firms using tax rate on capital income as a policy instrument. We find that, in general, countries with a lower tax burden are net receivers of foreign direct investment. Furthermore, fiscal pressure interacts with the quality of infrastructures to exert a combined influence on the equilibrium location of the firms. Financial support from FEDER and project BEC2003-02271 is gratefully acknowledged.     

Do geographical agglomeration, growth and equity conflict?

Abstract.  The paper analyses the impact of economic integration on individual inequality and regional disparity in a model of endogenous growth and geography. Assuming localised learning externalities and perfect mobility of capital, trade integration of economies yields a trade-off for the policy maker because it increases growth and decreases inequality on the one hand, but geographical agglomeration strengthens on the other. However, a policy that aims to improve trade in ideas does not face this trade-off.
Abstract.  El artículo analiza el impacto de la integración económica en la inecualidad individual y la disparidad regional en un modelo de crecimiento endógeno y geografía. Asumiendo externalidades de aprendizaje localizadas y una perfecta movilidad de capitales, la integración de comercio de economías crea un trade-off para el formulador de políticas porque por un lado aumenta el crecimiento y disminuye la inecualidad, pero por otro aumenta la aglomeración geográfica. Sin embargo, una política que trate de mejorar un intercambio de ideas no se enfrenta a este trade-off .
 

     

A consideration of the “no-black-hole” condition

The purpose of this paper is to investigate the economic interpretation of the no-black-hole condition (NBHC) described in the Chapt. 4 of the book by Fujita, Krugman and Venables (1999), under the context of a more general model. The main findings are as follows. First, there is the case in which the NBHC does not hold even though the real wage falls at the symmetric equilibrium. Secondly, the NBHC in the more general model requires both a reduction in profits in response to an increase in the number of firms and a fall in the real wage rate in response to an increase in labor at the symmetric equilibrium. Thirdly, we show that NBHCs obtained in some analyses are special cases of our model. Moreover, we show that the NBHC includes the stability condition for the short-run equilibrium. Therefore the NBHC is not affected by relative speed of labor movement and entry/exit of firms.Received: November 2002/Accepted: March 2004     

Innovation, knowledge spillovers and local labour markets

Abstract.  This article investigates the role played by geography in the promotion of innovation. In order to examine these issues we employ empirical data from Finland in order to test the extent to which the variety and nature of face-to-face contacts affects the innovation performance of the firm. In addition, we then also control for the geographical mobility of the labour employed by the firm. This allows us to identify the different roles that the geography of knowledge spillovers and exchanges and the geography of labour markets play in the innovation process.     

Urban agglomeration: Knowledge spillovers and product diversity

There is no doubt that people like to migrate to large cities because they can acquire a wider range of products and jobs, but also because they can more easily exchange information and ideas. In this respect, we attempt to explain the formation of metropolitan areas by using a general equilibrium model, in which concentration emerges not only from interaction between increasing returns to scale at firm level, transport costs and labor mobility, but also from human capital externalities. This paper shows that there is new scope for government activity. Received: August 2000/Accepted: January 2002 I am indebted to J.L. Ferreira for valuable comments on an earlier draft. I also wish to thank T. Smith, participants at the ERWIT Workshop and EEA Congress, and two anonymous referees for helpful suggestions. Financial support from the Spanish Ministry of Science and Technology through DGICYT grant PB98-0613-C02-01, and from the Regional Government of Galicia via PGIDT00PXI30001PN is gratefully acknowledged.     

Factor distribution, capital intensity and spatial agglomeration

This paper investigates the effect of capital on agglomeration behavior within a framework of the core-periphery model. Capital is interregionally mobile in the short-run, whereas labor is mobile in the long-run. In conclusion, (i) capital and industries are distributed among regions more equally than workers when transport costs are sufficiently high, and the relation is reversed when transport costs are sufficiently low; (ii) a rise in capital intensity stimulates agglomeration in the economy.Received: July 2003/Accepted: February 2004I am indebted to Professors M. Fujita and K. Yamamoto for valuable comments on an earlier draft. I also wish to thank Professors T. Mori, T. Kinugasa, T. Kuroda, M. Makabenta and two anonymous referees for helpful suggestions.     

Firm location and monopolistic competition

This paper investigates the equilibrium spatial distributions of firms in a circular city under monopolistic competition. We show that the uniform distribution constitutes an equilibrium for a very general class of transport cost functions. Moreover, we establish that symmetric partial agglomeration arises as an equilibrium if and only if the transport cost function is linear and the number of locations is even. We also find that all rotationally symmetric distributions with continuous support are spatial equilibria if the transport costs are linear. This multiplicity of equilibria however disappears in the case of strictly concave transport costs: the uniform distribution is then the unique spatial equilibrium distribution with continuous support.     

Public capital, regional productivity and spatial spillovers

This paper examines the impact of infrastructure on productivity in the various regions of Spain. Using the duality approach and panel data, we estimate regional cost functions for the three main sectors of the economy for the period 1964–1991. Public capital is included as an unpaid factor of production, and two separate variables are used to establish whether the different categories of public capital have varying effects on costs. Results show that public infrastructure noticeably reduces private costs and increases overall productivity. We also estimate a production function with regional and time fixed effects. Finally, we include a study of spillover effects in transport infrastructure. Estimations suggest that such effects are of some relevance, a fact which may have serious implications for public policy on infrastructure. Received: January 2002 / Accepted: November 2004 All authors are members of the Academic Robotics Group. In listing The Academic Robotics Group, the authors are endeavoring to place each of the participant institutions on an equal footing in terms of effort and authorship. M. A. Talamini is serving as presenter.     

Trade costs,wage difference,and endogenous growth

In this paper, we develop an endogenous growth and international trade model with two countries in which equilibrium wages in the two countries are different between two countries. First, when trade costs are high, the share of manufacturing firms in the large country increases with a decline in trade costs because of market size. However, the share of firms then decreases with a decline in trade costs when trade costs are low because of wage differences. Finally, all firms agglomerate in the small country, since production costs in the small country are low. In this process, the innovation sector shifts its location from the large‐market and high‐wage country to the small‐market and low‐wage country.     

Regional policy and spillovers from FDI in the UK

This paper tests one of the fundamental assumptions of regional policy makers over the last 20 years. Western governments, in seeking to attract internationally mobile capital have spent significant sums of public money on subsidies and grants. This is justified on the basis that the social returns to FDI are significantly greater than the private returns, due to productivity or technology spillovers from inward investors to domestic industry. However, this paper generates some estimates of these spillovers for both assisted areas and non-assisted areas in the UK, and questions the size of these social returns, arguing that productivity spillovers do not occur in regions where significant inward investment incentives are available.Thanks are due to Holger Gorg, Sourafel Girma, Jim Love, Max Munday, Nigel Pain, Jim Taylor, Colin Wern and to seminar participants in Cardiff, Aston, Lancaster and London for comments on an earlier version of this paper.Received: June 2001/Accepted: May 2003     

Networks and firm location

This paper models the decision of vertically linked firms to build either partitioned or connected networks of supply of an intermediate good. In each case, there is a correlation between the locations of upstream and downstream firms. Input specificity is related to both variable costs (transport costs of the input) and fixed costs (learning costs of the use of the input). When both are low, a connected network emerges, whereas, in the opposite case, we find a partitioned pattern. In the boundary region, there are multiple equilibria, either asymmetric (mixed network) or symmetric.     

Multiple equilibria, stability, and asymmetries in Krugman's core-periphery model

Paul Krugman developed a general equilibrium model with two sectors and two regions in 1991, from which two patterns of industrial localization could be endogenously deduced, dispersion at 50% and total concentration. The introduction of transport costs, which depend on the size of the population, are meant to capture effects produced by the trade-off between congestion costs and advantages derived from the possession of infrastructure, thus generates stable asymmetric multiple equilibria. The outcome of asymmetric stable multiple equilibria demonstrates the fruitfulness of this extension of the original model. Received: 23 June 1998 / Accepted: 5 October 1999     

Economic structure,productivity, and infrastructure quality in Southern Mexico

There are large and sustained differences in the economic performance of sub-national regions in most countries. In this paper, we examine economic structure and productivity in Southern Mexico and compare these to the rest of the country. We employ firm level data from Mexican manufacturing to test the relative importance of firm level characteristics such as human capital and technology adoption compared to external characteristics such as infrastructure quality and regulatory environment in explaining productivity differentials. We find that the economic structure of the South is considerably different from the rest of the country, with the economic landscape being dominated by micro enterprises and a relative specialization in low productivity activities. This coupled with low skill levels and fewer skill upgrading opportunities reduces the performance of Southern firms. Productivity differentials between Southern and other firms, however, only exist for micro enterprises. The econometric analysis shows that while employee training and technology adoption enhance productivity, access to markets through improvements in transport infrastructure linking urban areas also have important productivity effects.We would like to thank Jose Luis Guasch for comments and suggestions and Julio Gonzalez for assistance in getting access to the firm level ENESTYC data. We appreciate the cooperation and collaboration of the Mexican National Institute of Statistics, Geography and Informatics (INEGI) throughout the process. This paper is part of a larger program to examine the contribution of economic geography and investment climate to economic efficiency. The findings reported in this paper are those of the authors alone, and should not be attributed to the World Bank, its executive directors, or the countries they represent.Received: September 2002 / Accepted: May 2003     

When R&D matters for regional growth: A tripod approach

In modern economic growth theory, R&D and the subsequent production of new knowledge are the driving forces for long-term regional growth. Empirical evidence, however, does not always support this popular belief in the regional context. Using a simple growth accounting model, this study examines the role of R&D in regional growth. Estimation results from the proposed models show that knowledge commercialization and retention factors, such as entrepreneurship, university research, human capital, social capital, and industry structure, play significant roles in the regional R&D appropriation mechanism. Findings from this study suggest that R&D policy needs to be designed to take into account other regional factors.     

Intermediate goods and the location of productive activity

This paper assesses the impact of the production and use of an intermediate good upon the location of productive activity in an economy consisting of two asymmetrically sized regions. The Nash equilibria of locations of an upstream and two downstream firms are completely defined in the the space of parameters transport cost and intensity of vertical linkages. While the relationship between transport cost and agglomeration is usually regarded as a decreasing one, the inclusion of an intermediate good can make it nonmonotonic.Received: September 2003/Accepted:01 March 2004The author wishes to thank the Editor of The Annals of Regional Science and three anonymous referees for helpful comments. The usual disclaimer applies.