Spatial Concentration in the Financial Industry
AbstractThis paper investigates factors that determine the spatial concentration in the financial industry. Why does the financial industry have such a high spatial concentration? The theoretical framework is based on theories from regional economics, with a focus on agglomeration effects, externalities, and the regional clustering of an industry. The positive agglomeration effects arise from access to i) specialized labor, ii) specialized suppliers, and iii) knowledge dispersion (Marshall 1920). Jacobs (1961, 1969) contributes to a discussion of the role of cities (urban economies) in terms of innovations and entrepreneurship. The high degree of spatial concentration in the financial sector emphasizes the importance of local embeddedness, networks, face-to-face communication, knowledge spillovers, and spatial proximity for the organization of the financial industry. These factors accentuate the importance of local knowledge and the dispersion of knowledge, factors that have been thoroughly discussed and analyzed in the field of Austrian economics. Therefore, an Austrian view is included to examine the role of knowledge in the spatial concentration of financial centers. Scholars such as Hayek (1937; 1945) and Lachmann (1978 ) contribute to understanding the use of knowledge in society.
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Bibliographic InfoPaper provided by The Ratio Institute in its series Ratio Working Papers with number 188.
Length: 32 pages
Date of creation: 28 Feb 2012
Date of revision:
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More information through EDIRC
Spatial Concentration; Financial Industries; Knowledge; Information; Face-to-face communication;
Find related papers by JEL classification:
- B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
- B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
- D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-03-08 (All new papers)
- NEP-GEO-2012-03-08 (Economic Geography)
- NEP-IND-2012-03-08 (Industrial Organization)
- NEP-URE-2012-03-08 (Urban & Real Estate Economics)
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