Adjustment Costs and Long Run Spatial Agglomerations

17 Pages Posted: 30 Aug 2013

See all articles by William A. Brock

William A. Brock

University of Wisconsin, Madison - Department of Economics; University of Missouri at Columbia - Department of Economics

Anastasios Xepapadeas

Athens University of Economics and Business; University of Bologna - School of Economics, Management, and Statistics

A.N. Yannacopoulos

Athens University of Economics and Business

Date Written: August 29, 2013

Abstract

We introduce knowledge spillovers as an externality in the production function of competitive firms operating in a finite spatial domain under adjustment costs. Spillovers are spatial as productive knowledge flows more easily among firms located nearby. When knowledge spillovers are not internalized by firms spatial agglomerations may emerge endogenously in a competitive equilibrium, however, they do not emerge at the steady state of the social optimum.

Keywords: Investment Theory, Adjustment Costs, Spatial Agglomerations

JEL Classification: D21, R3, C61

Suggested Citation

Brock, William A. and Xepapadeas, Anastasios and Yannacopoulos, Athanasios, Adjustment Costs and Long Run Spatial Agglomerations (August 29, 2013). FEEM Working Paper No. 68.2013, Available at SSRN: https://ssrn.com/abstract=2317908 or http://dx.doi.org/10.2139/ssrn.2317908

William A. Brock (Contact Author)

University of Wisconsin, Madison - Department of Economics ( email )

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University of Missouri at Columbia - Department of Economics ( email )

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Columbia, MO 65211
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Anastasios Xepapadeas

Athens University of Economics and Business ( email )

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Athens, 104 34
Greece

University of Bologna - School of Economics, Management, and Statistics ( email )

Piazza Scaravilli 1
40126 Bologna, fc 47100
Italy

Athanasios Yannacopoulos

Athens University of Economics and Business ( email )

76 Patission Street
Athens, 104 34
Greece

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