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Spatial Concentration in the Financial Industry




This paper investigates factors that determine the spatial concentration in the financial industry. Why does the financial industry have such a high spatial concentration? The theoretical framework is based on theories from regional economics, with a focus on agglomeration effects, externalities, and the regional clustering of an industry. The positive agglomeration effects arise from access to i) specialized labor, ii) specialized suppliers, and iii) knowledge dispersion (Marshall 1920). Jacobs (1961, 1969) contributes to a discussion of the role of cities (urban economies) in terms of innovations and entrepreneurship. The high degree of spatial concentration in the financial sector emphasizes the importance of local embeddedness, networks, face-to-face communication, knowledge spillovers, and spatial proximity for the organization of the financial industry. These factors accentuate the importance of local knowledge and the dispersion of knowledge, factors that have been thoroughly discussed and analyzed in the field of Austrian economics. Therefore, an Austrian view is included to examine the role of knowledge in the spatial concentration of financial centers. Scholars such as Hayek (1937; 1945) and Lachmann (1978 [1956]) contribute to understanding the use of knowledge in society.

Suggested Citation

  • Palmberg, Johanna, 2012. "Spatial Concentration in the Financial Industry," Ratio Working Papers 188, The Ratio Institute.
  • Handle: RePEc:hhs:ratioi:0188

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    Cited by:

    1. Andersson, Åke E. & Andersson, David Emanuel & Daghbashyan, Zara & Hårsman, Björn, 2014. "Location and spatial clustering of artists," Regional Science and Urban Economics, Elsevier, vol. 47(C), pages 128-137.
    2. Andersson , Åke E. & Andersson , David E. & Daghbashyan, Zara & Hårsman, Björn, 2013. "Spatial Clustering Of Artists," INDEK Working Paper Series 2013/2, Royal Institute of Technology, Department of Industrial Economics and Management.

    More about this item


    Spatial Concentration; Financial Industries; Knowledge; Information; Face-to-face communication;

    JEL classification:

    • B26 - Schools of Economic Thought and Methodology - - History of Economic Thought since 1925 - - - Financial Economics
    • B53 - Schools of Economic Thought and Methodology - - Current Heterodox Approaches - - - Austrian
    • D53 - Microeconomics - - General Equilibrium and Disequilibrium - - - Financial Markets

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