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Local economic structure and growth

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  • Almeida, Rita

Abstract

The author tests how the local economic structure-measured by a region's sector specialization, competition, and diversity-affects the technological growth of manufacturing sectors. Most of the empirical literature on this topic assumes that in the long run more productive regions will attract more workers and use employment growth as a measure of local productivity growth. However, this approach is based on strong assumptions about national labor markets. The author shows that when these assumptions are relaxed, regional adjusted wage growth is a better measure of regional productivity growth than employment growth. She compares the two measures using data for Portugal between 1985 and 1994. With the regional adjusted wage growth, the author finds evidence of Marshall-Arrow-Romer (MAR) externalities in some sectors and no evidence of Jacobs or Porter externalities in most of the manufacturing sectors. Theseresults are at odds with her findings for employment-based regressions, which show that concentration and region size have a negative and significant effect in most of the manufacturing sectors. These employment-based results are in line with most of the existing literature, which suggests that using employment growth to proxy for productivity growth leads to misleading results.

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Bibliographic Info

Paper provided by The World Bank in its series Policy Research Working Paper Series with number 3728.

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Date of creation: 01 Oct 2005
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Handle: RePEc:wbk:wbrwps:3728

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Keywords: Labor Markets; Economic Theory&Research; Economic Growth; Municipal Financial Management; Achieving Shared Growth;

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References

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  1. de Lucio, Juan J. & Herce, Jose A. & Goicolea, Ana, 2002. "The effects of externalities on productivity growth in Spanish industry," Regional Science and Urban Economics, Elsevier, vol. 32(2), pages 241-258, March.
  2. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
  3. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  4. Fujita,Masahisa & Thisse,Jacques-François, 2013. "Economics of Agglomeration," Cambridge Books, Cambridge University Press, number 9781107001411.
  5. Federico Cingano & Fabiano Schivardi, 2003. "Identifying the Sources of Local Productivity Growth," Temi di discussione (Economic working papers) 474, Bank of Italy, Economic Research and International Relations Area.
  6. J. Vernon Henderson & Ari Kuncoro & Matthew Turner, 1992. "Industrial Development in Cities," NBER Working Papers 4178, National Bureau of Economic Research, Inc.
  7. 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.
  8. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July.
  9. Zvi Griliches, 1998. "Productivity, R&D, and the Data Constraint," NBER Chapters, in: R&D and Productivity: The Econometric Evidence, pages 347-374 National Bureau of Economic Research, Inc.
  10. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August.
  11. Krugman, Paul & Venables, Anthony J., 1994. "Globalization and the Inequality of Nations," CEPR Discussion Papers 1015, C.E.P.R. Discussion Papers.
  12. repec:fth:iniesr:430 is not listed on IDEAS
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Citations

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Cited by:
  1. Jan Kluge & Robert Lehmann, 2012. "Marshall or Jacobs? Answers to an unsuitable question from an interaction model," Ifo Working Paper Series ifo Working Paper No. 124, Ifo Institute for Economic Research at the University of Munich.
  2. Raimund Krumm & Harald Strotmann, 2010. "The Impact of Regional Supply and Demand Conditions on Job Creation and Destruction," IAW Discussion Papers 61, Institut für Angewandte Wirtschaftsforschung (IAW).
  3. Rita Almeida & Ana M. Fernandes, 2013. "Explaining local manufacturing growth in Chile: the advantages of sectoral diversity," Applied Economics, Taylor & Francis Journals, vol. 45(16), pages 2201-2213, June.
  4. Thulin, Per, 2009. "Labor Mobility, Knowledge Diffusion And Regional Growth," Working Paper Series in Economics and Institutions of Innovation 209, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  5. R. Paci & S. Usai, 2006. "Agglomeration economies and growth-The case of Italian local labour systems, 1991-2001," Working Paper CRENoS 200612, Centre for North South Economic Research, University of Cagliari and Sassari, Sardinia.
  6. Jan Kluge & Robert Lehmann, 2013. "Marshall or Jacobs? New insights from an interaction model," Jahrbuch für Regionalwissenschaft, Springer, vol. 33(2), pages 107-133, October.
  7. Raimund Krumm & Harald Strotmann, 2013. "The impact of regional location factors on job creation, job destruction and employment growth in manufacturing," Jahrbuch für Regionalwissenschaft, Springer, vol. 33(1), pages 23-48, February.
  8. Kutsenko, E., 2012. "Path Dependence in Spatial Distribution of Economic Activity: Bad News for Empiric Research of Agglomeration Effects," Journal of the New Economic Association, New Economic Association, vol. 14(2), pages 10-26.

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