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Nursery cities: urban diversity, process innovation, and the life cycle of products

Duranton, Gilles and Puga, Diego (2001) Nursery cities: urban diversity, process innovation, and the life cycle of products. American Economic Review, 91 (5). pp. 1454-1477. ISSN 0002-8282

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Identification Number: 10.1257/aer.91.5.1454


This paper develops microfoundations for the role that diversified cities play in fostering innovation. A simple model of process innovation is proposed, where firms learn about their ideal production process by making prototypes. We build around this a dynamic general-equilibrium model, and derive conditions under which diversified and specialized cities coexist. New products are developed in diversified cities, trying processes borrowed from different activities. On finding their ideal process, firms switch to mass production and relocate to specialized cities where production costs are lower. We find strong evidence of this pattern in establishment relocations across French employment areas 1993-96.

Item Type: Article
Official URL:
Additional Information: © 2001 American Economic Association
Divisions: Geography & Environment
Centre for Economic Performance
Subjects: G Geography. Anthropology. Recreation > G Geography (General)
H Social Sciences > HB Economic Theory
JEL classification: O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives
R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, and Changes
R - Urban, Rural, and Regional Economics > R3 - Production Analysis and Firm Location > R32 - Other Production and Pricing Analysis
Date Deposited: 05 Nov 2008 14:36
Last Modified: 26 May 2024 00:27

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