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

Duranton, Gilles and Puga, Diego (2000) Nursery cities: urban diversity, process innovation and the life-cycle of products. CEPDP (445). London School of Economics and Political Science. Centre for Economic Performance, London, UK.

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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 specialised 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 specialised cities with lower costs. When in equilibrium, this configuration welfare-dominates those with only diversified or only specialised cities. We find strong evidence of this relocation pattern in establishment relocations across French employment areas 1993û1996.

Item Type: Monograph (Discussion Paper)
Official URL:
Additional Information: © 2000 the authors
Divisions: Centre for Economic Performance
Geography & Environment
Subjects: H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
Date Deposited: 30 Jul 2008 16:53
Last Modified: 16 May 2024 11:23

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