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Agglomeration Externalities in Germany

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  • Eckhardt Bode

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Abstract

Several recent econometric investigations found externalities related to the density of economic activity to account for one fifth to one half of total regional variations in average labor productivity in the U.S. and big European countries, including Germany. The present paper shows for German NUTS 3 regions, first, that this result is not robust against a more extensive control for private returns that may be correlated with economic density. The paper presents, second, evidence of various types of agglomeration economies, including labor-market pooling, human-capital externalities, localized R&D spillovers, gains from the variety of intermediate goods, to affect regional productivity significantly. Although the productivity effects of these externalities within regions cannot be identified because they are observationally equivalent to individual returns, they can be identified by exploiting the spatial dimension of the data. Keywords: productivity, agglomeration externalities, spatial econometrics JEL: C21, R12

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Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa04p120.

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Date of creation: Aug 2004
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Handle: RePEc:wiw:wiwrsa:ersa04p120

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  1. Eckhardt Bode, 2004. "The spatial pattern of localized R&D spillovers: an empirical investigation for Germany," Journal of Economic Geography, Oxford University Press, vol. 4(1), pages 43-64, January.
  2. Audretsch, David B. & Feldman, Maryann P., 2004. "Knowledge spillovers and the geography of innovation," 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 61, pages 2713-2739 Elsevier.
  3. 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.
  4. Gordon H. Hanson, 2000. "Scale Economies and the Geographic Concentration of Industry," NBER Working Papers 8013, National Bureau of Economic Research, Inc.
  5. Börje Johansson & John Quigley, 2003. "Agglomeration and networks in spatial economies," Papers in Regional Science, Springer, vol. 83(1), pages 165-176, October.
  6. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  7. Antonio Ciccone, 1998. "Agglomeration-effects in Europe," Economics Working Papers 499, Department of Economics and Business, Universitat Pompeu Fabra, revised Aug 1999.
  8. Vernon Henderson, 2001. "Marshall's Scale Economies," Working Papers 01-17, Center for Economic Studies, U.S. Census Bureau.
  9. Rivera-Batiz, Francisco L., 1988. "Increasing returns, monopolistic competition, and agglomeration economies in consumption and production," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 125-153, February.
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