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Identifying the Sources of Local Productivity Growth

  • Federico Cingano

    ()

    (Bank of Italy, Economic Research Department)

  • Fabiano Schivardi

    ()

    (Bank of Italy, Economic Research Department)

Using firm-level based TFP indicators (as opposed to employment-based proxies) we estimate the effects of alternative sources of dynamic externalities at the local geographic level. Contrary to previous empirical work, we find that industrial specialization and scale indicators positively affect TFP growth at the city-industry level, while we do not find evidence that either the degree of local competition or productive variety impact on subsequent productivity growth. Employment-based regressions yield nearly the opposite results, in line with previous empirical work. We show that such regressions could suffer from serious identification problems when interpreted as evidence of dynamic externalities. This calls into question the conclusions of the existing literature on dynamic agglomeration economies.

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Paper provided by Bank of Italy, Economic Research and International Relations Area in its series Temi di discussione (Economic working papers) with number 474.

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Date of creation: Jun 2003
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Handle: RePEc:bdi:wptemi:td_474_03
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