Knowledge exchange, matching, and agglomeration

Abstract

Despite wide recognition of their significant role in explaining sustained growth and economic development, uncompensated knowledge spillovers have not yet been fully modeled with a microeconomic foundation. The main purpose of this paper is to illustrate the exchange of knowledge as well as its consequences on agglomerative activity in a general-equilibrium search-theoretic framework. Agents, possessing differentiated types of knowledge, search for partners to exchange ideas and create new knowledge in order to improve production efficacy. When individuals' types of knowledge are too diverse, a match is less likely to generate significant innovations. We demonstrate the extent of agglomeration has significant implications for the patterns of information flows in economies. Further, by simultaneously determining the patterns of knowledge exchange and the spatial agglomeration of an economy we identify additional channels for interaction between agglomerative activity and knowledge exchange. Finally, contrary to previous work in spatial agglomeration, our model suggests that agglomerative environments may be either under-specialized and under-populated or over-specialized and over-populated relative to the social optimum.

Impact of Production Linkages on Industrial Upgrading in ASEAN, the People's Republic of China, and India: Organizational Evidence of a Global Supply Chain

“…The first is the theory of knowledge creation through mutual learning. The theoretical background of this paper explains a model of learning and knowledge creation through face-to-face communication among different types of agents, as described by Fujita (2008, 2009);Fujita (2007); and Berliant, Reed, and Wang (2006). The central concern of these models is how diversity of knowledge among members could affect the decision on collaboration and its outcome.…”

Thick market externalities in a spatial model

“…5 Notice that the two conditions (11) and (12) are more likely to apply to locations near the right and left borders, respectively, of the regional economy than to central locations. Hence, even when agents are uniformly distributed over space, those at border locations may search only among a smaller set of potential trading partners compared to those at central locations.…”

“…The mechanism of agglomeration economies explored in this paper is a variant of the matching mechanism of agglomeration economies in Kim (1989Kim ( , 1991, Helsley and Strange (1990), and Berliant et al (2006), where clustering helps raise productivity by improving the quality of matches. In the present model, clustering helps raise productivity by enabling producers to match more frequently.…”

Dynamic Urban Models: Agglomeration and Growth

“…This is motivated by its useful implications for urban employment, as illustrated in Helsley and Strange (1990), Abdel-Rahman and 7 Wang (1995), Coulson, Laing and Wang (2000), and Brueckner and Zenou (2003). Specifically, we focus on a matching model of agglomeration and growth based on a recent study by Berliant, Reed and Wang (2003), where the role of horizontal knowledge exchange in spatial interactions is explored. We illustrate why improvements in the effectiveness of knowledge exchange may lead to higher growth and examine the channels through which an increase in the rate of economic growth may lead to spatial agglomeration.…”

“…Since none of these previous papers consider urbanization dynamics and city growth, our discussion is based on unpublished work by Berliant, Reed and Wang (2003). First we shall describe the basic model that does not involve growth, and then give its extensions to various growth contexts.…”