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What underlies localization and urbanization economies? Evidence from the location of new firms

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  • Jordi Jofre-Monseny

    ()
    (Universitat de Barcelona & Institut d’Economia de Barcelona (IEB))

  • Raquel Marín-López

    ()
    (Universitat de Barcelona & Institut d’Economia de Barcelona (IEB))

  • Elisabet Viladecans-Marsal

    ()
    (Universitat de Barcelona & Institut d’Economia de Barcelona (IEB))

Abstract

The objective of this paper is to analyze why firms in some industries locate in specialized economic environments (localization economies) while those in other industries prefer large city locations (urbanization economies). To this end, we examine the location decisions of new manufacturing firms in Spain at the city level and for narrowly defined industries (three-digit level). First, we estimate firm location models to obtain estimates that reflect the importance of localization and urbanization economies in each industry. In a second step, we regress these estimates on industry characteristics that are related to the potential importance of three agglomeration theories, namely, labor market pooling, input sharing and knowledge spillovers. Localization effects are low and urbanization effects are high in knowledge-intensive industries, suggesting that firms (partly) locate in large cities to reap the benefits of inter-industry knowledge spillovers. We also find that localization effects are high in industries that employ workers whose skills are more industry-specific, suggesting that industries (partly) locate in specialized economic environments to share a common pool of specialized workers.

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File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2012-08.pdf
File Function: First version, 2012
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File URL: http://www.pcb.ub.edu/xreap/aplicacio/fitxers/XREAP2012-08.pdf
File Function: Revised version, 2012
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Bibliographic Info

Paper provided by Xarxa de Referència en Economia Aplicada (XREAP) in its series Working Papers with number XREAP2012-08.

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Length: 44 pages
Date of creation: May 2012
Date of revision: May 2012
Handle: RePEc:xrp:wpaper:xreap2012-08

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Postal: Espai de Recerca en Economia, Facultat de Ciències Econòmiques i Empresarials, Universitat de Barcelona, c/ Tinent Coronel Valenzuela, 1-11, 08034 Barcelona
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Web page: http://www.pcb.ub.edu/xreap
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Keywords: Agglomeration economies; manufacturing industries; localization economies; urbanization economies; specialization.;

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References

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  1. Jofre-Monseny, Jordi & Marín-López, Raquel & Viladecans-Marsal, Elisabet, 2011. "The mechanisms of agglomeration: Evidence from the effect of inter-industry relations on the location of new firms," Journal of Urban Economics, Elsevier, vol. 70(2-3), pages 61-74, September.
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Cited by:
  1. Anna Castañer & Mª Mercè Claramunt, 2014. "Optimal stop-loss reinsurance: a dependence analysis," Working Papers XREAP2014-04, Xarxa de Referència en Economia Aplicada (XREAP), revised Apr 2014.
  2. Antonio Manresa & Ferran Sancho, 2012. "Leontief versus Ghosh: two faces of the same coin," Working Papers XREAP2012-18, Xarxa de Referència en Economia Aplicada (XREAP), revised Oct 2012.

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