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Productivity Growth and Pecuniary Knowledge Externalities: An Empirical Analysis of Agglomeration Economies in European Regions

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  • Cristiano Antonelli

    (Department of Economics, University of Turin - University of Turin)

  • Pier Paolo Patrucco

    (Université de Turin - Department of Economics, University of Turin - UNITO - Università degli studi di Torino)

  • Francesco Quatraro

    () (GREDEG - Groupe de Recherche en Droit, Economie et Gestion - UNS - Université Nice Sophia Antipolis - UCA - Université Côte d'Azur - CNRS - Centre National de la Recherche Scientifique)

Abstract

The article investigates the effects of the agglomeration of technological activities on the growth in regional productivity, applying the notion of pecuniary knowledge externalities. Pecuniary knowledge externalities enable one to appreciate both the gains and losses associated with the regional concentration of knowledge-generating activities. Both are two sides of the same coin. The gains are due to the reduction in the prices of knowledge as input into its dedicated markets, while the losses stem from the reduction in the prices of knowledge as an output. This analysis allows us to contextualize the effect of geographic proximity on knowledge externalities and their impact on regional growth. Our analysis leads to the hypothesis of an inverted U-shaped relationship between the agglomeration of innovation activities and productivity growth. The empirical analysis based on a large sample of European regions from 1996 to 2003 supports the hypothesis that agglomeration yields diminishing net positive effects beyond a maximum.

Suggested Citation

  • Cristiano Antonelli & Pier Paolo Patrucco & Francesco Quatraro, 2011. "Productivity Growth and Pecuniary Knowledge Externalities: An Empirical Analysis of Agglomeration Economies in European Regions," Post-Print halshs-00727606, HAL.
  • Handle: RePEc:hal:journl:halshs-00727606
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