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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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Abstract

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: http://www.aeaweb.org/aer/
Additional Information: © 2001 American Economic Association
Library of Congress subject classification: G Geography. Anthropology. Recreation > G Geography (General)
H Social Sciences > HB Economic Theory
Journal of Economic Literature Classification System: 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
Sets: Departments > Geography and Environment
Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Rights: http://www.lse.ac.uk/library/usingTheLibrary/academicSupport/OA/depositYourResearch.aspx
Date Deposited: 05 Nov 2008 14:36
URL: http://eprints.lse.ac.uk/14917/

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