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Technology, Agglomeration, and Regional Competition for Investment

Author

Listed:
  • Bruce A. Blonigen
  • Van Kolpin
Abstract
The active 'courting' of firms by municipalities, regions, and even nations has a long-standing history and the competition for firm location through a wide variety of incentives seems to have escalated to new heights in recent years. We develop a model that explores technology development by firms that face regional competition for their investment and examine the endogenous determination of regions' policies, firm technology, and agglomeration externalities. In particular, we find that regional competition leads firms to inefficiently distort their research and development efforts in hopes of improving their standing in the competition amongst regions for their investment. This loss in efficiency is aggravated by the agglomeration externalities that are inherently present in many industries. We offer several case studies that provide evidence consistent with our theoretical conclusions.

Suggested Citation

  • Bruce A. Blonigen & Van Kolpin, 2002. "Technology, Agglomeration, and Regional Competition for Investment," NBER Working Papers 8862, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:8862
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    Cited by:

    1. Goldberg , Mike & Palladini, Eric, 2008. "Chile : a strategy to promote innovative small and medium enterprises," Policy Research Working Paper Series 4518, The World Bank.

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    More about this item

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production

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