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When are localization and urbanization economies important?

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  • Jordi Jofre-Monseny

    ()

  • Raquel Marín-López
  • Elisabet Viladecans-Marsal

Abstract

The objective of this paper is to analyze the influence of industry characteristics on the localization and urbanization agglomeration patterns of new firm location. To this end, we analyze the location decisions of new manufacturing firms in Spain. First, for a 3-digit level, we identify for each industry which type of agglomeration economies –localization or urbanization- explain new firm’s location. And second, using the coefficients obtained in these estimations for both agglomeration economies, we analyse which industry characteristics are the sources that explain differences in the strength of these economies. We focus on industry characteristics related to the three microfoundations of agglomeration that have been most prominent in the theoretical literature: labor market pooling, input sharing and knowledge spillovers. Our results point out that for industries with high influence of localization economies on their location patterns what matters is the labour market pooling mechanism. For the industries with higher effect of urbanization economies on their location patterns, knowledge spillovers and output sharing are the sources of agglomeration. The dependence of natural resources affects negatively the incidence of urbanization agglomeration economies on firm location.

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Bibliographic Info

Paper provided by European Regional Science Association in its series ERSA conference papers with number ersa12p820.

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Date of creation: Oct 2012
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Handle: RePEc:wiw:wiwrsa:ersa12p820

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  1. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
  2. Andersson, Fredrik & Burgess, Simon & Lane, Julia I., 2007. "Cities, matching and the productivity gains of agglomeration," Journal of Urban Economics, Elsevier, vol. 61(1), pages 112-128, January.
  3. Guy Dumais & Glenn Ellison & Edward L Glaeser, 1998. "Geographic Concentration as a Dynamic Process," Working Papers 98-3, Center for Economic Studies, U.S. Census Bureau.
  4. Carlton, Dennis W, 1983. "The Location and Employment Choices of New Firms: An Econometric Model with Discrete and Continuous Endogenous Variables," The Review of Economics and Statistics, MIT Press, vol. 65(3), pages 440-49, August.
  5. Combes, Pierre-Philippe, 2000. "Economic Structure and Local Growth: France, 1984-1993," Journal of Urban Economics, Elsevier, vol. 47(3), pages 329-355, May.
  6. Lourens Broersma & Jan Oosterhaven, 2009. "Regional Labor Productivity In The Netherlands: Evidence Of Agglomeration And Congestion Effects," Journal of Regional Science, Wiley Blackwell, vol. 49(3), pages 483-511.
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