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Agglomeration and Productivity - evidence from firm-level data

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  • Andersson, Martin

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

  • Lööf, Hans

    (CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology)

Abstract

Do agglomerations stimulate productivity? An extensive literature on agglomeration economies, or urban increasing returns, has analyzed this question with aggregated spatial data. This paper estimates the relationship between agglomeration and productivity at the firm level using static and dynamic models. It makes use of a rich dataset comprising register information on all manufacturing firms in Sweden with 10 or more employees over the period 1997-2004. Three things emerge. First, firms located in larger regions are more productive when controlling for size, human capital, physical capital, ownership structure, import and export, industry classification and time trend. Second, results from dynamic panel estimations suggest a learning effect in that agglomeration enhances firms’ productivity. Third, the role of agglomeration phenomena does not seem to have a clear coupling to firm size.

Suggested Citation

  • Andersson, Martin & Lööf, Hans, 2009. "Agglomeration and Productivity - evidence from firm-level data," Working Paper Series in Economics and Institutions of Innovation 170, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
  • Handle: RePEc:hhs:cesisp:0170
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    More about this item

    Keywords

    productivity; agglomeration economies; spatial externalities; external scale economies; urban increasing returns; spatial selection;
    All these keywords.

    JEL classification:

    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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