Abstract
This paper develops a general equilibrium model with endogenous clusters and an endogenous network of division of labour to formalize and explore the interrelationship and rules of industrial clusters, the network of division of labour, and the economies of specialization and agglomeration in the new era of globalization and regionalization. The model suggests that institutional efficiency and competition among countries and industries will facilitate important circular effects, propelling and shaping the arrangement and allocation of industrial clusters, establishing their position in the value chain, and, consequently, determining the status of economic growth. In particular, the improvements in institutional efficiency of economic and technology systems will expand the demand for transactions and network size, which, in turn, will determine the development of cluster and network scope, as well as the position in the production value chain.
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