Spatial Concentration and Productivity in the Italian Cultural and Creative Industries

Given the Cultural and Creative Industries' (CCIs) growing contribution to Italy's GDP and their fragmented structure of small-medium enterprises, this paper explores the impact of agglomeration on Italian province productivity. To overcome the Modifiable Areal Unit Problem (MAUP) inherent in administrative boundaries, we employ a distance-based specialization index to assess whether firms benefit from operating in close proximity to peers within the same industry. We replicate this analysis at both the domain level (Cultural vs Creative) and the macro-sector level (e.g., Architecture and Design, Performing Arts). Our findings reveal a positive effect of agglomeration on Total Factor Productivity (TFP) across all levels of aggregation. However, when utilizing value added per employee as a metric for productivity, the positive impact is exclusively significant at the macro-sector level, dissipating at more aggregated domain classifications. These results underscore the necessity of facilitating co-location policies for CCIs, particularly given their SME-dominated nature.