Spatial Industrial Dynamics - An Empirical Test of the Lead-Lag Model

One fundamental hypothesis within the field of spatial industrial dynamics is the idea that in most countries it is possible to identify a limited number of leading urban regions. They keep their lead by continuously initiating, imitating and developing activities that over time to a substantial degree tend to diffuse to other locations in a hierarchy of functional urban regions. There are a number of forces that might propel diffusion processes of this kind. One force often mentioned in the literature is the maturing of products and industries that makes them less dependent upon the external economies offered by the large urban regions. Another force is the change in the type and the organisation of production taking place over time in the non-leading regions, which, for example, produce an increased demand for producer services. A third force worth mentioning is the secular rise in the real incomes in non-leading regions which give rise to an increased demand for various consumer services due to an income elas-ticity of demand greater than one. Given the above hypothesis a number of questions may be formulated: Is it possible to docu-ment these kinds of decentralisation processes? If so, what are their characteristics? How rapid are they? What differences are there between different products, different industries, different technologies, and so on? Are the follower regions catching up over time? The purpose of this paper is to analyse the spatial behaviour of a specific aggregate of private industries, namely urban growth industries, in Sweden during the period 1993-1998. Urban growth industries are defined in this paper as private industries in which the leading urban region in Sweden - the Stockholm region - specialise and that exhibit rapid growth in the rest of the country. The choice to analyse this group of industries are motivated by the hypothesis that it is this group of industries that has the largest potential for decentralisation of produc-tion and employment in the near future.