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Sectoral agglomeration economies in a panel of European regions

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Author Info
Brülhart, Marius
Mathys, Nicole A.

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Abstract

We estimate agglomeration economies, defined as the effect of density on labour productivity in European regions. The analysis of Ciccone [Ciccone, A., 2002, Agglomeration effects in Europe, European Economic Review, 46 (2), 213-227.] is extended in two main ways. First, we use dynamic panel estimation techniques (system GMM), thus offering an alternative methodological treatment of the inherent endogeneity problem. Second, the sector dimension in the data allows for disaggregated estimation. Our results confirm the presence of significant agglomeration effects at the aggregate level, with an estimated long-run elasticity of 13%. Repeated cross-section regressions suggest that the strength of agglomeration effects has increased over time. At the sector level, the dominant pattern is of cross-sector "urbanisation" economies and own-sector congestion diseconomies. A notable exception is financial services, for which we find strong positive productivity effects from own-sector density.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 38 (2008)
Issue (Month): 4 (July)
Pages: 348-362
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Handle: RePEc:eee:regeco:v:38:y:2008:i:4:p:348-362

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  1. Combes, Pierre-Philippe & Magnac, Thierry & Robin, Jean-Marc, 2004. "The Dynamics of Local Employment in France," IZA Discussion Papers 1061, Institute for the Study of Labor (IZA). [Downloadable!]
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  2. Combes, Pierre-Philippe & Overman, Henry G., 2004. "The spatial distribution of economic activities in the European Union," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 64, pages 2845-2909 Elsevier. [Downloadable!] (restricted)
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  3. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March. [Downloadable!] (restricted)
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  4. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
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  6. Bond, Stephen Roy & Hoeffler, Anke & Temple, Jonathan, 2001. "GMM Estimation of Empirical Growth Models," CEPR Discussion Papers 3048, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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  7. Federico Cingano & Fabiano Schivardi, 2004. "Identifying the Sources of Local Productivity Growth," Journal of the European Economic Association, MIT Press, vol. 2(4), pages 720-742, 06. [Downloadable!] (restricted)
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  8. Arellano, Manuel & Bover, Olympia, 1995. "Another look at the instrumental variable estimation of error-components models," Journal of Econometrics, Elsevier, vol. 68(1), pages 29-51, July. [Downloadable!] (restricted)
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  9. Marius Brülhart & Pamina Koenig, 2005. "New Economic Geography meets Comecon: Regional Wages and Industry Location in Central Europe," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 05.01, Université de Lausanne, Faculté des HEC, DEEP. [Downloadable!]
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  11. Maurice J.G. Bun & Frank Windmeijer, 2007. "The Weak Instrument Problem of the System GMM Estimator in Dynamic Panel Data Models," Bristol Economics Discussion Papers 07/595, Department of Economics, University of Bristol, UK. [Downloadable!]
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  12. Dekle, Robert & Eaton, Jonathan, 1999. "Agglomeration and Land Rents: Evidence from the Prefectures," Journal of Urban Economics, Elsevier, vol. 46(2), pages 200-214, September. [Downloadable!] (restricted)
  13. Henderson, J. Vernon, 2003. "Marshall's scale economies," Journal of Urban Economics, Elsevier, vol. 53(1), pages 1-28, January. [Downloadable!] (restricted)
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  14. Richard Blundell & Stephen Bond, 2000. "GMM Estimation with persistent panel data: an application to production functions," Econometric Reviews, Taylor and Francis Journals, vol. 19(3), pages 321-340. [Downloadable!] (restricted)
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  15. Gordon H. Hanson, 2000. "Scale Economies and the Geographic Concentration of Industry," NBER Working Papers 8013, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  16. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier. [Downloadable!] (restricted)
  17. Rice, Patricia & Venables, Anthony J. & Patacchini, Eleonora, 2006. "Spatial determinants of productivity: Analysis for the regions of Great Britain," Regional Science and Urban Economics, Elsevier, vol. 36(6), pages 727-752, November. [Downloadable!] (restricted)
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  18. Henderson, Vernon, 1997. "Externalities and Industrial Development," Journal of Urban Economics, Elsevier, vol. 42(3), pages 449-470, November. [Downloadable!] (restricted)
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  19. Steve Bond, 2002. "Dynamic panel data models: a guide to microdata methods and practice," CeMMAP working papers CWP09/02, Centre for Microdata Methods and Practice, Institute for Fiscal Studies. [Downloadable!]
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  21. Duranton, Gilles & Henry G Overman, 2003. "Testing for Localisation Using Micro-Geographic Data," Royal Economic Society Annual Conference 2003 69, Royal Economic Society. [Downloadable!]
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  22. Blien, Uwe & Suedekum, Jens & Wolf, Katja, 2006. "Local employment growth in West Germany: A dynamic panel approach," Labour Economics, Elsevier, vol. 13(4), pages 445-458, August. [Downloadable!] (restricted)
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(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Marius BRÜLHART & Federica SBERGAMI, 2008. "Agglomeration and Growth : Cross-Country Evidence," Cahiers de Recherches Economiques du Département d'Econométrie et d'Economie politique (DEEP) 08.04, Université de Lausanne, Faculté des HEC, DEEP. [Downloadable!]
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