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The Influence of Agglomeration Externalities on Manufacturing Growth Within Indonesian Locations
Abstract
Differences in agglomeration externalities and industrial regimes between locations generate performance differentials for their localized economic activities. For more than two decades, scholars have debated which externality is dominant for growth and under which regime. This study aims to resolve this debate by analyzing the influence of agglomeration economies on the growth of five-digit manufacturing sectors and firms for Indonesian cities and regencies between 2000 and 2009. This is investigated employing the recent reconceptualization of variety based on sectoral linkages distinguishing related and unrelated varieties, which allow assessing their idiosyncratic economic roles. The findings support that economic relatedness is the dominant source for expansion of sectors and firms within Indonesian locations. Specialized clusters and competition are inversely related to manufacturing growth, although the latter fosters sectoral employment within Indonesian regencies. Population density and human capital show antithetic effects between cities and regencies due to their distinctive urbanization trajectories and industrial compositions.
... Such differences in industrial development paths will also directly determine the evolution of spatial structures and intercity relations. Although a large body of work has examined the (dis)advantages of Marshallian and Jacobian externalities for regional development (Beaudry & Schiffauerova, 2009;Ercole & O'Neill, 2016;Feldman & Audretsch, 1999;Porter, 2000;van der Panne, 2004;Wei & Gu, 2013), research on regional spatial evolution and development in reference to industrial agglomerations must be furthered. ...
... Urban production structure diversification calculated with this method can be divided into related and unrelated varieties. In this work, related variety is measured as the weighted sum of entropy at the 4-digit level for each 2-digit class (Ercole & O'Neill, 2016) and is measured as follows: ...
Urban agglomeration is the engine of national development and regional prosperity. Although extensive work has investigated issues related to this new form of spatial governance, few studies have directly illustrated the spatial integration of urban agglomeration and its relationship with industrial development. This paper employs nighttime light data and industrial enterprise datasets to investigate the spatial integration and industrial development in the Yangtze River Economic Belt (YREB) of China for 1995–2015. We here illustrate the significant relationship between the spatial integration of urban agglomerations and the characteristics of industrial development. In the process of spatial integration, urban form, intercity relation and their evolution show clear regional differences. Because of the differences in socio-economic and geographical characteristics, urban systems are more advanced and closely related in developed areas. A significant negative (positive) spatial correlation between industrial specialization (diversification) and urban form is supported by using bivariate Moran's I, and spatial clustering patterns are clearly different across the three urban agglomerations. A panel regression reveals that intercity relations are significantly associated with the characteristics of industrial development. Higher levels of industrial diversification and competition are associated with weaker intercity relations, while industrial structures similarities are reversed. These findings could be used to formulate reasonable policies and plans and to support future regional spatial integration and coordinated development.
... The working of Jacobs-type externalities builds on the idea that the exchange of related and complementary knowledge, fostering research and experimentation for innovation, particularly arises in a diver- The economic geography literature has also sought to explain the differences of these two types of externalities and to determine which of them leads to better economic outcomes. However, thus far the evidence on this matter has remained inconclusive (de : There are both studies supporting intra-sectoral knowledge spillovers and Marshallian-type specialization externalities (e.g., Daskalopoulou & Liargovas, 2010;Illy et al., 2011;Martin et al., 2011;Groot et al., 2014) and studies that have produced results in favor of extra-sectoral knowledge spillovers and Jacobs-type externalities (e.g., Lasagni, 2011;Li et al., 2014;Zhang, 2015;Tavassoli & Jienwatcharamongkhol, 2016;Ercole & O'Neill, 2017;Mendoza-Velazquez, 2017). Thus, evaluated from a partial impact point of view, both types of knowledge spillovers are expected to increase firm performance. ...
This work studies the linkages between spatially bound knowledge spillovers, internal research, and innovation (R&I) activities and firm productivity. Spillovers are modeled to emanate from intra- and extra-sectoral R&I activities in the firms’ regional business environments. We specifically test for non-linearities in the complex relationship between these internal and external knowledge sources and quantify their joint marginal effect on firm productivity. Our empirical results for a large panel of German manufacturing firms (1) underline the overall importance of knowledge spillovers in driving productivity and (2) point at distinct interactions between the included knowledge sources: First, we find that intra-sectoral knowledge spillovers only have a statistically significant effect on firm productivity when extra-sectoral spillovers are sufficiently large. Secondly, the link between knowledge spillovers and productivity varies with the level of the firms’ internal R&I activities.
... Based upon firm-level data, Widodo et al. (2015) observe that local specialisation increases firm's technical efficiency while diversity would reduce it. The Indonesian study by Ercole and O'neill (2016) stresses the role of industrial linkages, pointing to the positive impact of related variety. In the Chinese case, Ning et al. (2016) put special emphasize on the role of agglomeration effect on the level and spillovers effects of FDI. ...
The paper investigates whether the tertiarization and rapid urbanization faced by developing countries favour agglomeration economies. Focusing on Ecuadorian cantons, a productivity equation is estimated using the generalized method of moments model with instruments controlling for endogeneity. The varying impact of industrial concentration, diversity, competition and density across industries is investigated and, for the first time, the implication of the level of urbanization on agglomeration externalities is studied. Stronger effects are found for services. The threshold of urbanization at which diversity, density and competition agglomeration externalities all generate positive effects was 33%, while they seem challenged by congestion in highly urbanized cantons.
... Notwithstanding this, the sort of methodologies adopted here have not lost their significance and are still applied to studies on related variety and growth Ercole and O'Neill, 2016), and, more generally, on agglomeration economies and employment growth (Eriksson and Forslund, 2014;Witte et al., 2014;Xu and Warner, 2015;Fritsch and Wyrwich, 2016), i.e. works that, even though with different aims, are meant like ours to investigate growth at local level by using, among others, the ordinary least squares (OLS) method. ...
The aim of this study is to investigate the role and importance of related variety in fostering employment growth, covering the period 1991-2011 for the Italian case. This work supports the study of economic and local development from the perspective of the related-variety approach, focusing on the need for a certain degree of cognitive proximity at local level to promote innovation and employment growth. The results underline that variety has a positive impact on employment growth, and related variety matters even more.
With the help of intelligent thinking programs, intelligent computing can help deal with various complex social problems and use data to study the essence of economic phenomena. Using the related theories and procedures of data mining and functional calculation, quantitative research is conducted on the impact of technological investment and industrial structure upgrading in Guangzhou on technological innovation. Quantitative research results show that there is a high degree of positive correlation between technology investment, industrial structure upgrading and technological innovation capabilities, among which technology investment has a more significant impact. Based on the results of intelligent computing, it is proposed that Guangzhou should attach importance to basic research, strengthen support for cutting-edge technologies such as big data and cloud computing, continuously optimize the environment for urban innovation and development, and actively cultivate new drivers of economic development.
This study estimates the effects of externalities of agglomeration in the form of knowledge spillovers (Marshall–Arrow–Romer/job specialization, Jacobs/diversity, and Porter/competition) and of externalities obtained from human capital on employment growth based on the technological intensity in an industry. We employed the data of International Standard Industrial Classification of all Economic Activities two-digit numerical codes for manufacturing industries at the level of districts and cities in Indonesia in 2010 and 2015 and ran the estimation model using ordinary least squares. The results show that while employment growth is constrained by specialization, it is complied by diversity though it is statistically insignificant across technological intensity in the industry. Competition has negative effects on both low- and medium–low-technology industries; however, it has positive effects on high-technology industries. Additionally, human capital negatively affects low-technology industries, while it positively affects medium–low and high-technology industries.
In this paper, we seek to explore the agglomeration externalities of creative industries impacting on industrial efficiency, both at the regional level and at the sector level. Firstly, we apply a data envelopment analysis model to compute the efficiency scores of creative industries in China. The result shows that China's industrial efficiency whether in different provinces or different creative sectors is characterized by huge disparities. Secondly, using the data from China's 31 provinces and 50 creative sectors during the period of 2004–2014, we empirically explore whether and how the development of creative industries agglomeration impact on industrial efficiency, where the agglomeration is distinguished between regional specialization, geographical concentration, and industrial concentration. We find that the three types of agglomeration externalities all play important roles in increasing productive efficiency in creative industries. The study also confirms that industrial efficiency is more likely to be increased by attracting much smaller firms concentrating in a given area, while this effect is mixed in a given creative sector.
This paper investigates whether related variety, among other types of spatial externalities,
affected regional growth in Spain at the NUTS 3 level during the period 1995–2007.We
found evidence that related variety matters for growth across regions, especially when using two new methods that measure revealed relatedness between industries. The first method is based on Porter’s cluster classification while the second method uses the proximity index proposed by Hidalgo et al. Our analyses show that Spanish provinces with a wide range of related industries tend to show higher economic growth rates, once we control for other determinants of growth.
How do regions diversify over time? Inspired by recent studies, we argue that regions diversify into industries that make use of capabilities in which regions are specialized. As the spread of capabilities occurs through mechanisms that have a strong regional bias, we expect that capabilities available at the regional level play a larger role than capabilities available at the country level for the development of new industries. To test this, we analyze the emergence of new industries in 50 Spanish regions at the NUTS 3 level in the period 1988-2008. We calculate the capability-distance between new export products and existing export products in Spanish regions, and provide econometric evidence that regions tend to diversify into new industries that use similar capabilities as existing industries in these regions. We show that proximity to the regional industrial structure plays a much larger role in the emergence of new industries in regions than proximity to the national industrial structure. This suggests that capabilities at the regional level enable the development of new industries.
In this article, we test to what extent the Modifiable Areal Unit Problem (MAUP) moderates the effect of agglomeration externalities on areal sectoral employment growth by varying the initial geographical scale of analysis. Using spatial cross-regressive modelling, we find different effects of agglomeration forces across geographical scales. As the MAUP is a theoretical as well as a methodological problem, research should not only work with proper statistical specifications, but also relate this more explicitly to hypotheses concerning the geographical scale at which agglomeration externalities operate. .
This paper investigates the impact of regional sectoral diversity on regional employment growth in Italy over the period 1991-2001. Assuming that externalities may be stronger between industries selling similar products or sharing the same skills and technology (i.e. related industries), we analyze the role of different forms of sectoral variety at the Local Labour System (LLS) level. We consider variety both in terms of shared complementary competences that induce effective interactive learning and innovation, as well as a portfolio strategy to protect a region from external shocks in demand. Our results show strong evidence of a general beneficial effect of a diversified sectoral structure but suggest also the need to differentiate the analysis between manufacturing and services. In particular, overall local employment growth seems to be favoured by the presence of a higher variety of related service industries, while no role is played by related variety in manufacturing. When looking at diversity externalities between macro-aggregates, the service industry is affected by related variety in manufacturing, while no evidence of externalities is found from tertiary sectors to manufacturing.
Irish policymakers interest in the concept of industrial clusters dates back to the Culliton Report, which recommended the promotion of industrial clusters focused on niches of national competitive advantage. This view of agglomeration economies based on industrial clusters derives largely from the work of Michael Porter. Given the widespread use in the term 'cluster', Doyle and Fanning review the evolution of this concept, and outline the international and Irish evidence regarding the existence of Porterian clusters. The authors conclude that while there is little evidence that such clusters have had a significant effect on productivity growth in Ireland, the research to date has been inadequate, and has been hampered by a lack of appropriate data.
abstractThe question of how new regional growth paths emerge has been raised by many leading economic geographers. From an evolutionary perspective, there are strong reasons to believe that regions are most likely to branch into industries that are technologically related to the preexisting industries in the regions. Using a new indicator of technological relatedness between manufacturing industries, we analyzed the economic evolution of 70 Swedish regions from 1969 to 2002 with detailed plant-level data. Our analyses show that the long-term evolution of the economic landscape in Sweden is subject to strong path dependencies. Industries that were technologically related to the preexisting industries in a region had a higher probability of entering that region than did industries that were technologically unrelated to the region's preexisting industries. These industries had a higher probability of exiting that region. Moreover, the industrial profiles of Swedish regions showed a high degree of technological cohesion. Despite substantial structural change, this cohesion was persistent over time. Our methodology also proved useful when we focused on the economic evolution of one particular region. Our analysis indicates that the Linköping region increased its industrial cohesion over 30 years because of the entry of industries that were closely related to its regional portfolio and the exit of industries that were technologically peripheral. In summary, we found systematic evidence that the rise and fall of industries is strongly conditioned by industrial relatedness at the regional level.
This paper addresses the question to what extent the performance of industrial sites is affected by their local economic structure
and accessibility. For this aim, we test for the existence of statistically significant relationships between agglomeration
externalities (specialization, diversity, and competition), accessibilty measures and the employment growth of a particular
industry on a particular site. We use data on employment growth of site-industries on 68 formal industrial sites in the municipality
of Amsterdam between 1998 and 2006. We show that at the site-industry level, specialization hampers growth. Furthermore, we
find that industrial sites that are easily accessible from the highway grow relatively fast, as well as sites located in the
Amsterdam harbour area.
In the analysis of geographical spillovers, a commonly accepted hypothesis is that the different actors of innovation need to be physically closed to one another because the transfer of tacit knowledge implies frequent face-to-face relations. This hypothesis is put under closer examination in this paper. The first section analyses the need for economic agents to be closely located to develop research and innovative activities, starting with the analysis of their need for co-ordination and using some case studies. Based on the example of three French regions, the second section examines the importance given by the local development policies to geographical proximity in order to support the rapid development of local networks favouring innovation. In both sections, nonlocal relations appear as a key factor to develop innovation. As a conclusion, nonlocal relations should be encouraged by local development policies in the same way as local relations.
This article presents estimates of the impact of regional variety and trade linkages on regional economic growth by means of export and import data by Italian province (NUTS 3) and sector (three-digit) for the period 1995-2003. Our results show strong evidence that related variety contributes to regional economic growth. Thus, Italian regions that are well endowed with sectors that are complementary in terms of competences (i.e., that show related variety) perform better. The article also assesses the effects of the breadth and relatedness of international trade linkages on regional growth, since they may bring new and related variety to a region. Our analysis demonstrates that regional growth is not affected by simply being well connected to the outside world or having a high variety of knowledge flowing into the region. Rather, we found evidence of related extraregional knowledge sparking intersectoral learning across regions. When the cognitive proximity between the extraregional knowledge and the knowledge base of a region is neither too small nor too large, real learning opportunities are present, and the external knowledge contributes to growth in regional employment. Copyright (c) 2009 Clark University.
In economic theory, one can distinguish between variety as a source of regional knowledge spillovers, called Jacobs externalities, and variety as a portfolio protecting a region from external shocks. We argue that Jacobs externalities are best measured by related variety (within sectors), while the portfolio argument is better captured by unrelated variety (between sectors). We introduce a methodology based on entropy measures to compute related variety and unrelated variety. Using data at the NUTS-3 level in the Netherlands for the period 1996-2002 we find that Jacobs externalities enhance employment growth, while unrelated variety dampens unemployment growth. Productivity growth can be explained by traditional determinants including investments and R&D expenditures. Implications for regional policy follow
This paper uses data for eight manufacturing industries to test for and characterize dynamic production externalities in cities. The authors find evidence of both Marshall-Arrow-Romer (MAR) externalities, which are associated with past own industry employment concentration, and Jacobs externalities, which are associated with past diversity of local total employment. For mature capital goods industries, there is evidence of MAR externalities but none of Jacobs externalities. For new high-tech industries, there is evidence of Jacobs and MAR externalities. These findings are consistent with the notion that new industries prosper in large, diverse metropolitan areas but, with maturity, production decentralizes to smaller, more specialized cities. Copyright 1995 by University of Chicago Press.
The definition of second order interaction in a (2 × 2 × 2) table given by Bartlett is accepted, but it is shown by an example that the vanishing of this second order interaction does not necessarily justify the mechanical procedure of forming the three component 2 × 2 tables and testing each of these for significance by standard methods.*
Loschmidt hat darauf hingewiesen, daß nach den Gesetzen der Mechanik ein System nach irgendeinem Kraftgesetz in Wechselwirkung stehender Teilchen, das von gewissen festgelegten Anfangsbedingungen aus eine Folge von Zuständen durchlaufen hat, diese Folge in umgekehrter Richtung durchlaufen und wieder zu seinem Anfangszustand zurückkehren wird, wenn man die Geschwindigkeiten aller Teilchen umkehrt. Diese Tatsache läßt es als zweifelhaft erscheinen, ob es möglich ist, einen rein mechanischen Beweis für den zweiten Hauptsatz der Thermodynamik zu geben, der aussagt, daß die Entropie für eine beliebige derartige Folge immer wachsen muß.
Da die Entropie abnehmen würde, wenn das System diese Folge in umgekehrter Richtung durchläuft, erkennen wir, daß die Tatsache, daß die Entropie in Wahrheit bei allen physikalischen Prozessen unserer eigenen Welt zunimmt, nicht allein aus der Natur der zwischen den Teilchen wirkenden Kräfte hergeleitet werden kann, sondern eine Folge der Anfangsbedingungen zu sein scheint. Trotzdem setzen wir, um einen mechanischen Beweis des zweiten Hauptsatzes zu geben, keine spezielle Art von Anfangsbedingungen voraus, wenn wir die Absicht haben, uns auf einen statistischen Standpunkt zu stellen. Wenn auch ein beliebiger einzelner ungleichförmiger Zustand (der geringer Entropie entspricht) dieselbe Wahrscheinlichkeit wie irgendein einzelner (hoher Entropie entsprechender) gleichförmiger Zustand hat, gibt es doch viel mehr gleichförmige als nichtgleichförmige Zustände. Bei zufälliger Wahl des Anfangszustandes entwickelt sich infolgedessen das System fast mit Sicherheit nach einem gleichförmigen Zustand hin, und die Entropie muß fast sicher wachsen.
Based on the success of the World Scientific publication “Governing and Managing Knowledge” edited by Thomas Menkhoff, Hans-Dieter Evers and Chay Yue Wah in 2005, this unique volume presents 16 new theoretical-practical papers on the strategic aspects of developing knowledge-based economies with case studies from South Korea, Singapore, Malaysia, Thailand, Vietnam, Indonesia, Philippines and Uzbekistan. A key question which the book seeks to answer is what Asian policy-makers and leaders in government, economy and society can do to further enhance learning and capability formation so as to foster sustainable development in an increasingly globalized world. It addresses the politico-cultural and socio-economic challenges of effectively managing both knowledge resources and coping with the great digital divide created by globalization, continuous technology innovations and rapid external change. A key objective of the publication is to enable latecomers in the knowledge race to understand some of the critical success factors of sustainable knowledge-based development and what it takes to build a resilient knowledge-based economy. © 2011 by World Scientific Publishing Co. Pte. Ltd. All rights reserved.
Since the pioneering works of Schumpeter (1934, 1942), a considerable amount of research has investigated the relationship between the pace of innovative activity and the pace of economic development. Although increases in the stock of knowledge — as well as the constantly improving possibility of exploiting any given stock of knowledge - have been widely regarded as the driving force of economic growth in developed countries (Kuznets 1966; Teece 1981), economists have only recently made serious efforts to model the process of knowledge creation. Many recent contributions to economic growth theory have however remarked that although we generally model the level of technological knowledge as a public good, with no restrictions imposed on the spatial extension of the spillovers associated with it, the stocks of technological knowledge do differ significantly across countries and regions (see for example Romer 1994).
With the publication of his best-selling books "Competitive Strategy (1980) and "Competitive Advantage (1985), Michael E. Porter of the Harvard Business School established himself as the world's leading authority on competitive advantage. Now, at a time when economic performance rather than military might will be the index of national strength, Porter builds on the seminal ideas of his earlier works to explore what makes a nation's firms and industries competitive in global markets and propels a whole nation's economy. In so doing, he presents a brilliant new paradigm which, in addition to its practical applications, may well supplant the 200-year-old concept of "comparative advantage" in economic analysis of international competitiveness. To write this important new work, Porter and his associates conducted in-country research in ten leading nations, closely studying the patterns of industry success as well as the company strategies and national policies that achieved it. The nations are Britain, Denmark, Germany, Italy, Japan, Korea, Singapore, Sweden, Switzerland, and the United States. The three leading industrial powers are included, as well as other nations intentionally varied in size, government policy toward industry, social philosophy, and geography. Porter's research identifies the fundamental determinants of national competitive advantage in an industry, and how they work together as a system. He explains the important phenomenon of "clustering," in which related groups of successful firms and industries emerge in one nation to gain leading positions in the world market. Among the over 100 industries examined are the German chemical and printing industries, Swisstextile equipment and pharmaceuticals, Swedish mining equipment and truck manufacturing, Italian fabric and home appliances, and American computer software and movies. Building on his theory of national advantage in industries and clusters, Porter identifies the stages of competitive development through which entire national economies advance and decline. Porter's finding are rich in implications for both firms and governments. He describes how a company can tap and extend its nation's advantages in international competition. He provides a blueprint for government policy to enhance national competitive advantage and also outlines the agendas in the years ahead for the nations studied. This is a work which will become the standard for all further discussions of global competition and the sources of the new wealth of nations.
Mameli F., Faggian A. and McCann P. Estimation of local employment growth: do sectoral aggregation and industry definition matter?, Regional Studies. Over the last two decades, numerous attempts have been made to explain the determinants of local growth, with as yet little overall consensus. The aim of this paper is to reveal a potential problem of parameter heterogeneity in growth regressions associated with the use of data at different levels of aggregation. Using Italian data and focusing on both manufacturing and service industries, it is shown how different empirical outcomes can be generated from exactly the same spatial units simply by changing the levels of sectoral aggregation. Moreover, the results point to some advantages associated with using more disaggregated data.
This paper investigates the impact of related variety on regional employment growth in Finland between 1993 and 2006 by means of a dynamic panel regression model. We find that related variety in general has no impact on growth. Instead, after separating related variety among low-and-medium-tech sectors from related variety among high-tech sectors, we find that only the latter affects regional growth. Hence, we find evidence that the effect of related variety on regional employment growth is conditioned by the technological intensity of the local sectors involved.
• The volume represents an attempt to work out a systematic introductory course on statistical methods—the methods available for discussing, as distinct from collecting, statistical data—suited to those who possess only a limited knowledge of mathematics : an acquaintance with algebra up to the binomial theorem, together with such elements of co-ordinate geometry as are now generally included therewith, is all that is assumed. I hope that it may prove of some service to the students of the diverse sciences in which statistical methods are now employed. The variety of illustrations and examples has, however, been increased to render the book more suitable for the use of biologists and others besides those interested in economic and vital statistics, and some of the more difficult parts of the subject have been treated in greater detail than was possible in a sessional course of some thirty lectures. For the rest, the chapters follow closely the arrangement of the course, the three parts into which the volume is divided corresponding approximately to the work of the three terms. To enable the student to proceed further with the subject, fairly detailed lists of references to the original memoirs have been given at the end of each chapter: exercises have also been added for the benefit, more especially, of the student who is working without the assistance of a teacher. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
• The volume represents an attempt to work out a systematic introductory course on statistical methods—the methods available for discussing, as distinct from collecting, statistical data—suited to those who possess only a limited knowledge of mathematics : an acquaintance with algebra up to the binomial theorem, together with such elements of co-ordinate geometry as are now generally included therewith, is all that is assumed. I hope that it may prove of some service to the students of the diverse sciences in which statistical methods are now employed. The variety of illustrations and examples has, however, been increased to render the book more suitable for the use of biologists and others besides those interested in economic and vital statistics, and some of the more difficult parts of the subject have been treated in greater detail than was possible in a sessional course of some thirty lectures. For the rest, the chapters follow closely the arrangement of the course, the three parts into which the volume is divided corresponding approximately to the work of the three terms. To enable the student to proceed further with the subject, fairly detailed lists of references to the original memoirs have been given at the end of each chapter: exercises have also been added for the benefit, more especially, of the student who is working without the assistance of a teacher. (PsycINFO Database Record (c) 2012 APA, all rights reserved)
Whether diversity or specialization of economic activity better promotes technological change and subsequent economic growth has been the subject of a heated debate in the economics literature. The purpose of this paper is to consider the effect of the composition of economic activity on innovation. We test whether the specialization of economic activity within a narrow concentrated set of economic activities is more conducive to knowledge spillovers or if diversity, by bringing together complementary activities, better promotes innovation. The evidence provides considerable support for the diversity thesis but little support for the specialization thesis.
Bell System Technical Journal, also pp. 623-656 (October)
For many years, regional scientists, economists, and geographers have been unable to clarify the influence of economic diversity on unemployment and instability in regional economies of the United States, the United Kingdom, and Canada. This article presents plausible theory, proper units of analysis, valid measures, and more inclusive models of the diversity-stability relationship. The findings are generalizable because the sample includes most metropolitan areas in the U.S. The empirical analysis estimates the influence of diversity, employment concentrated in unstable industries, population size, growth rate, and control variables on unemployment and employment instability during the 1972–88 period. The results indicate that metropolitan areas which are more diverse experience lower unemployment rates and less instability than areas which are less diverse.
The local-government proliferation practice, as an implementation of Indonesia's decentralization reform, has resulted in a fragmentation of regional development, in which many local government consider themselves of their own 'kingdom of authority'. This attitude could in turn inhibit local and regional development. The phenomenon of Indonesia's local-government proliferation is unique, as not many countries in the world have experienced as rapid growth in regional proliferation as Indonesia. © The Applied Regional Science Conference (ARSC)/Blackwell Publishing Asia Pty Ltd. 2010.
Bishop P. and Gripaios P. Spatial externalities, relatedness and sector employment growth in Great Britain, Regional Studies. This paper examines the impact of externalities on employment growth in sub-regions of Great Britain by estimating ordinary least-squares (OLS) and maximum likelihood spatial models at the two-digit level for 23 sectors. Issues arising from relatedness, sector differences, competition, cross-boundary spillovers, and spatial autocorrelation are explicitly addressed. Results indicate that specialization has a generally negative impact on growth, whilst the impact of diversity is heterogeneous across sectors and strong local competition has a typically positive impact. The results question the merits of policies primarily aimed at promoting regional specialization and suggest that diversity, local competition, and sector heterogeneity are important policy issues.
This paper elaborates a view on knowledge as a result of a combinatorial search activity, so as to investigate its effects on economic growth at the regional level. Empirical estimations corroborate the hypothesis that knowledge coherence and variety, besides the traditional measure of knowledge stock, matter in shaping regional economic performances. The check for spatial dependence suggests that cross-regional externalities exert additional triggering effects on growth, without debasing the effects of knowledge properties. Important policy implications stem from the analysis, in that regional innovation strategies should be carefully coordinated so as to reach a higher degree of internal coherence and trigger economic performances.
A large amount of literature provides empirical evidence in support of Marshall or Jacobs theories regarding the specialization or diversity effects on the economic performance of regions. This paper surveys these scholarly contributions and summarizes their results according to their similarities and differences. The reviewed empirical work presents a diverse picture of possible conditions and circumstances under which each kind of externalities could be at work. The wide breadth of findings is generally not explained by differences in the strength of agglomeration forces across industries, countries or time periods, but by measurement and methodological issues. The levels of industrial and geographical aggregation together with the choice of performance measures, specialization and diversity indicators are the main causes for the lack of resolution in the debate. The 3-digit industrial classification seems to be the level at which MAR and Jacobs effects are undistinguishable from one another, and this is often exacerbated by a high level of geographical aggregation.
Although the productivity gains of urban agglomeration economies are generally found to be positive, there is a great deal of variability in the magnitude of reported estimates. This paper undertakes a quantitative review of the empirical literature on agglomeration through a meta-analysis of 729 elasticities taken from 34 different studies. The objective is to make sense of the range of values for agglomeration economies found in the literature by identifying some key characteristics that affect the magnitude of the results obtained. Our analysis confirms that study characteristics do matter. In particular, we find that country specific effects, the industrial coverage, the specification of agglomeration economies, and the presence of controls for both unobserved cross-sectional heterogeneity and differences in time-variant labor quality can give rise to large differences in the results reported in the literature. In contrast, correcting for reverse causality of agglomeration does not seem to produce noticeable changes in the size of urban agglomeration estimates. We also test for publication bias and find some evidence supporting the presence of positive reporting bias. The findings support the intuition that agglomeration estimates for any particular empirical context may have little relevance elsewhere.
This paper considers the empirical literature on the nature and sources of urban increasing returns, also known as agglomeration economies. An important aspect of these externalities that has not been previously emphasized is that the effects of agglomeration extend over at least three different dimensions. These are the industrial, geographic, and temporal scope of economic agglomeration economies. In each case, the literature suggests that agglomeration economies attenuate with distance. Recently, the literature has also begun to provide evidence on the microfoundations of external economies of scale. The best known of these sources are those attributed to Marshall (1920): labor market pooling, input sharing, and knowledge spillovers. Evidence to date supports the presence of all three of these forces. In addition, there is also evidence that natural advantage, home market effects, consumption opportunities, and rent-seeking all contribute to agglomeration.
We propose two model-based measures of the intensity of local and global agglomeration patterns at the industry level. Spatial plant dispersion in a given industry is modeled as the outcome of an error components process that provides a convenient framework for the simultaneous treatment of strictly localized and distance-related agglomeration forces. Having dealt with maximum likelihood inference on model parameters, tackling also the issue of data censoring, the methodology is subsequently implemented on Italian census data for both manufacturing and service industries and a comparison of findings with respect to standard agglomeration and spatial autocorrelation measures is undertaken.
This paper develops a dynamic industry model with heterogeneous firms to analyze the intra‐industry effects of international trade. The model shows how the exposure to trade will induce only the more productive firms to enter the export market (while some less productive firms continue to produce only for the domestic market) and will simultaneously force the least productive firms to exit. It then shows how further increases in the industry's exposure to trade lead to additional inter‐firm reallocations towards more productive firms. The paper also shows how the aggregate industry productivity growth generated by the reallocations contributes to a welfare gain, thus highlighting a benefit from trade that has not been examined theoretically before. The paper adapts Hopenhayn's (1992a) dynamic industry model to monopolistic competition in a general equilibrium setting. In so doing, the paper provides an extension of Krugman's (1980) trade model that incorporates firm level productivity differences. Firms with different productivity levels coexist in an industry because each firm faces initial uncertainty concerning its productivity before making an irreversible investment to enter the industry. Entry into the export market is also costly, but the firm's decision to export occurs after it gains knowledge of its productivity.
This paper develops a simple model that shows how a country can endogenously become differentiated into an industrialized "core" and an agricultural "periphery. " In order to realize scale economies while minimizing transport costs, manufacturing firms tend to locate in the region with larger demand, but the location of demand itself depends on the distribution of manufacturing. Emergence of a core-periphery pattern depends on transportation costs, economies of scale, and the share of manufacturing in national income. The study of economic geography-of the location of factors of production in space-occupies a relatively small part of standard economic analysis. International trade theory, in particular, conventionally treats nations as dimensionless points (and frequently assumes zero transportation costs between countries as well). Admittedly, models descended from von Thunen (1826) play an important role in urban studies, while Hotelling-type models of locational competition get a reasonable degree of attention in industrial organization. On the whole, however, it seems fair to say that the study of economic geography plays at best a marginal role in economic theory. On the face of it, this neglect is surprising. The facts of economic geography are surely among the most striking features of real-world economies, at least to laymen. For example, one of the most remarkable things about the United States is that in a generally sparsely populated country, much of whose land is fertile, the bulk of the population resides in a few clusters of metropolitan areas; a quarter of the inhabitants are crowded into a not especially inviting section of the East Coast. It has often been noted that nighttime satellite
This handbook chapter studies the theoretical micro-foundations of urban agglomeration economies. We distinguish three types of micro-foundations, based on sharing, matching, and learning mechanisms. For each of these three categories, we develop one or more core models in detail and discuss the literature in relation to those models. This allows us to give a precise characterisation of some of the main theoretical underpinnings of urban agglomeration economies, to discuss modelling issues that arise when working with these tools, and to compare different sources of agglomeration economies in terms of the aggregate urban outcomes they produce as well as in terms of their normative implications.
Firms and workers are much more productive in large and dense urban environments. There is substantial evidence of such agglomeration economies based on three approaches. First, on a clustering of production beyond what can be explained by chance or comparative advantage. Second, on spatial patterns in wages and rents. Third, on systematic variations in productivity with the urban environment. However, more needs to be learned about the causes of agglomeration economies. We have good models of agglomeration through sharing and matching, but not a deep enough understanding of learning in cities. Despite recent progress, more work is needed to distinguish empirically between alternative causes. Copyright (c) 2010, Wiley Periodicals, Inc.
Incl. bibliographical notes and references, index, biographical note on the author