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Spatial Density and Productivity – an analysis on one-by-one kilometer squares

Author

Listed:
  • Andersson, Martin

    (CIRCLE, Lund University and BTH)

  • Klaesson, Johan

    (CENSE, Jönköping International Business School)

  • P Larsson, Johan

    (CENSE, Jönköping International Business School)

Abstract

This paper reassesses the relationship between density and productivity by using detailed geo-coded data on wages and employment in Sweden. The contribution is empirical and builds on an analysis of spatial units of exactly the same size in terms of geographic surface. The data divide Sweden into areas of one square kilometer, and describe each area in terms of wages, worker characteristics and industry structure. Since the geographic areas are of constant size, the sheer number of employees in an area is an ‘exact’ measure of employment density. We find a significant relationship between density and productivity across squares. The estimated elasticity is in the 9-10 percent interval, and is insensitive to whether we employ a standard OLS estimator or a panel fixed effects estimator. Neighbor characteristics also matter in ways consistent with the idea of positive agglomeration externalities, where a location in a square with high density neighbors reflects proximity to (or a location in) a larger agglomeration. Moreover, the estimated relationship between productivity and density is insensitive to the chosen spatial scale.

Suggested Citation

  • Andersson, Martin & Klaesson, Johan & P Larsson, Johan, 2011. "Spatial Density and Productivity – an analysis on one-by-one kilometer squares," Working Paper Series in Economics and Institutions of Innovation 255, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    • Handle: RePEc:hhs:cesisp:0255
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    References listed on IDEAS

    as
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    4. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
    5. Martin Andersson & Urban Gråsjö, 2009. "Spatial dependence and the representation of space in empirical models," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(1), pages 159-180, March.
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    More about this item

    Keywords

    density; productivity; spatial dependence; geo-coded data; external scale economies; agglomeration externalities; Sweden; Modifiable Areal Unit Problem (MAUP);
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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