Geography Reference
In-Depth Information
T
9
IK
T
dT
A
IK
A
IK
B
B
EK
A
EK
B
Figure 7
.
1
The Nelson knowledge production function
Y
9
I
Y
dY
F
I
F
E
I
E
T
F
T
E
Figure 7
.
2
The Griliches production function
edge available at costs that are below equilibrium levels, the i rm will be able to generate
technological knowledge at lower costs and hence to produce a larger quantity of
Y
. The
i rm will select in fact the equilibrium point
E
, instead of
F
, where the i rm that has no
access to pecuniary knowledge externalities would go. The equilibrium in
E
implies a
smaller demand for the bundle of tangible inputs (
I
), a more intensive use of the technol-
ogy (
T
) and a larger output
Y
. As a matter of fact the amount of excess output
dY
gener-
ated by the i rm that can take advantage of positive pecuniary knowledge externalities
