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The empirics of agglomeration economies: the link with productivity

Author

Listed:
  • Ana Gouveia

    (GPEARI - Research and Economic Policy Division)

  • Sílvia Santos
  • Marli Fernandes

Abstract

There is a large branch of literature providing empirical evidence on the positive effects of agglomeration economies on productivity. However, for policy makers it is important to understand the role of agglomeration economies at a more micro level, disentangling the effects across industries, firm-level characteristics and time. The present survey reviews this literature, outlining the econometric approaches and methodological challenges. In general, results show that the magnitude of agglomeration economies differ substantially across industries and point to the presence of non-linear effects, also depending on the industry and product life cycles. The channels through which these effects operate may also differ – resulting from specialization externalities (within industries in the same region) and/or urbanisation externalities (across industries in the same region). Overall, the evidence reviewed in this survey highlights the need for policy makers to follow tailor-made approaches and to complement existing evidence with national level studies, maximizing potential productivity gains.

Suggested Citation

  • Ana Gouveia & Sílvia Santos & Marli Fernandes, 2017. "The empirics of agglomeration economies: the link with productivity," GEE Papers 0067, Gabinete de Estratégia e Estudos, Ministério da Economia, revised Feb 2017.
  • Handle: RePEc:mde:wpaper:0067
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    File URL: http://www.gee.gov.pt/RePEc/WorkingPapers/GEE_PAPERS_67.pdf
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    More about this item

    Keywords

    Agglomeration economies; Specialization externalities; Urbanization externalities; Productivity;
    All these keywords.

    JEL classification:

    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity

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