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The division of labor need not imply regional specialization

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  • Leppälä, Samuli
  • Desrochers, Pierre

Abstract

The regional specialization of economic activities is generally deemed desirable for three reasons: (1) the law of comparative advantage; (2) localized economies of scale; and (3) knowledge spillovers. Taking a methodological individualist perspective, we claim that: (1) the law of comparative advantage, while valid for individuals and firms, does not necessarily imply regional specialization when regions are viewed as consisting of heterogeneous individuals; (2) localized economies of scale are seldom specific to one industry and external in all but the regional level; and (3) the study of knowledge spillovers is inconclusive and would benefit from a more disaggregated perspective.

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  • Leppälä, Samuli & Desrochers, Pierre, 2010. "The division of labor need not imply regional specialization," Journal of Economic Behavior & Organization, Elsevier, vol. 74(1-2), pages 137-147, May.
    • Handle: RePEc:eee:jeborg:v:74:y:2010:i:1-2:p:137-147
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    1. Pierre Desrochers & Samuli Leppälä, 2011. "Creative Environments: The Case for Local Economic Diversity," Chapters, in: David Emanuel Andersson & Åke E. Andersson & Charlotta Mellander (ed.), Handbook of Creative Cities, chapter 21, Edward Elgar Publishing.
    2. Kuechle, Graciela, 2014. "Regional concentration of entrepreneurial activities," Journal of Economic Behavior & Organization, Elsevier, vol. 102(C), pages 59-73.

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