Industrial Clusters: Equilibrium, Welfare and Policy

16 Pages Posted: 17 Nov 2004

See all articles by Victor D. Norman

Victor D. Norman

Norwegian School of Economics (NHH); Norwegian School of Economics (NHH) - Department of Economics; Centre for Economic Policy Research (CEPR)

Anthony J. Venables

University of Oxford; Centre for Economic Policy Research (CEPR)

Multiple version iconThere are 2 versions of this paper

Abstract

This paper studies the size and number of industrial clusters that arise in a multi-country world in which one sector has a propensity to cluster because of increasing returns to scale. Equilibrium will generally have smaller clusters than the world welfare optimum, and possibly too many countries with a cluster. Countries have an incentive to use policy to attract an industrial cluster, but the equilibrium of the policy game between governments coincides with the world optimum so there is no "race to the bottom". Capping subsidy rates would lead to a proliferation of too many and too small clusters.

Suggested Citation

Norman, Victor D. and Venables, Anthony J., Industrial Clusters: Equilibrium, Welfare and Policy. Economica, Vol. 71, No. 284, pp. 543-558, November 2004. Available at SSRN: https://ssrn.com/abstract=615125

Victor D. Norman (Contact Author)

Norwegian School of Economics (NHH) ( email )

Helleveien 30
SIOS 5035 Bergen-Sandviken
N-5035 Bergen
Norway
+47 5 595 9217 (Phone)
+47 5 595 9565 (Fax)

Norwegian School of Economics (NHH) - Department of Economics

Helleveien 30
N-5035 Bergen
Norway

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Anthony J. Venables

University of Oxford ( email )

Mansfield Road
Oxford, Oxfordshire OX1 4AU
United Kingdom

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
14
Abstract Views
1,081
PlumX Metrics