We test for internal and external economies of scale in European manufacturing, employing a more disaggregated data set than has been used in earlier analyses. We aim to separate externalities from common business cycle effects. Fifteen European manufacturing industries in Germany, France, the UK and Italy are analysed. We focus on economies of scale at three levels: the national industry, the national industrial cluster and the transnational industry. Our results suggest that external economies of scale arising from inter-industry external effects and cross-country effects are less prevalent than increasing returns at the level of the industry and firm. Our results underscore the importance of the level of disaggregation in studies of internal and external economies of scale and argue that the external effects are highly country and industry specific.
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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number
2896.
Find related papers by JEL classification: C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity O47 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
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