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Sectoral diversification as insurance against economic instability

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  • Jan Kluge

Abstract

This paper examines the extent to which sectoral diversification can act as an insurance mechanism against fluctuations in regional gross value†added growth rates. Portfolio theory is applied to the growth†instability properties of German districts. Furthermore, a comprehensive diversification measure is defined. Stochastic Frontier Analysis is deployed in order to estimate whether diversification allows regions to achieve more efficient growth†instability combinations. The results confirm that diversification does generate such effects. Spatial interactions do also play a role: The effects are less pronounced for regions whose economic performance is mainly driven by the surrounding regions.

Suggested Citation

  • Jan Kluge, 2018. "Sectoral diversification as insurance against economic instability," Journal of Regional Science, Wiley Blackwell, vol. 58(1), pages 204-223, January.
  • Handle: RePEc:bla:jregsc:v:58:y:2018:i:1:p:204-223
    DOI: 10.1111/jors.12349
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    Cited by:

    1. repec:mup:actaun:actaun_2019067061561 is not listed on IDEAS
    2. Marina Yurievna Malkina, 2018. "Instability of Financial Return of Regional Economies and Its Determinants," Spatial Economics=Prostranstvennaya Ekonomika, Economic Research Institute, Far Eastern Branch, Russian Academy of Sciences (Khabarovsk, Russia), issue 3, pages 88-114.
    3. Kurt A. Hafner, 2016. "Regional industrial diversification: evidence from German gross value added
      [Regionale Diversifizierung der Branchenstruktur: Empirische Evidenz aus der Bruttowertschöpfung in den Ländern der Bunde
      ," Review of Regional Research: Jahrbuch für Regionalwissenschaft, Springer;Gesellschaft für Regionalforschung (GfR), vol. 36(2), pages 169-193, October.
    4. repec:ces:ifodre:v:25:y:2018:i:05:p:21-26 is not listed on IDEAS

    More about this item

    JEL classification:

    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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