Duranton, Gilles and Puga, Diego (2000) Nursery cities: urban diversity, process innovation and the life-cycle of products. CEPDP, 445. Centre for Economic Performance, London School of Economics and Political Science, 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)|
|Additional Information:||© 2000 the authors|
|Uncontrolled Keywords:||Cities; diversity; specialisation; innovation; learning; life-cycle|
|Library of Congress subject classification:||H Social Sciences > HB Economic Theory
H Social Sciences > HD Industries. Land use. Labor
|Sets:||Collections > Economists Online
Research centres and groups > Centre for Economic Performance (CEP)
Departments > Geography and Environment
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