Working Paper: NBER ID: w25595
Authors: Wenjung Liang; Chaocheng Mai; Jacques-François Thisse; Ping Wang
Abstract: Science parks play a growing in knowledge-based economies by accommodating high-tech firms and providing an environment that fosters location-dependent knowledge spillovers and promote R&D investments by firms. Yet, not much is known about the economic conditions under which such entities may form in equilibrium without government interventions. This paper develops a spatial equilibrium model with a competitive final sector and a monopolistic competitive intermediate sector, which allows us to determine necessary and sufficient conditions for a science park to emerge as an equilibrium outcome. We show that strong localized knowledge spillovers, high startup costs, skilled labor abundance, or low commuting costs make intermediate firms more likely to cluster and a science park more likely to form. We also show that the productivity of the final sector is highest when intermediate firms cluster. As the decay penalty, firms' startup and workers' commuting costs become lower, science parks will eventually be fragmented.
Keywords: science parks; knowledge spillovers; spatial equilibrium; agglomeration economies
JEL Codes: D51; L22; O33; R13
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| strong localized knowledge spillovers (O36) | increased likelihood of intermediate firms clustering (F12) |
| high startup costs (M13) | increased likelihood of intermediate firms clustering (F12) |
| abundance of skilled labor (J24) | increased likelihood of intermediate firms clustering (F12) |
| low commuting costs (R48) | increased likelihood of intermediate firms clustering (F12) |
| increased likelihood of intermediate firms clustering (F12) | enhanced productivity of the final sector (O49) |
| increased clustering (C38) | reduced startup costs (M13) |
| increased clustering (C38) | reduced commuting costs (R48) |
| reduced startup costs (M13) | incentivizes formation of science parks (O31) |
| reduced commuting costs (R48) | incentivizes formation of science parks (O31) |