Quaderni del Dipartimento di Scienze Economiche e Matematico-Statistiche dell'Università del Salento - Collana di Economia

We extend the standard economic geography model by introducing regional differences in technology levels and by assuming that initial technological gaps may be closed only when the learning capabilities of the lagging region are su sufficiently developed. Interregional knowledge spill-overs take place only when the initial technological gap is not too wide,and when trade costs, taken as a proxy for the obstacles to interaction between firms of di different regions, are su sufficiently low. Hence, low trade costs may produce either the agglomeration or the dispersion of the modern sector, while high trade costs lead to its agglomeration in the leading region.