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Agglomeration economies in the Finnish manufacturing sector

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  • Kirsi Mukkala

Abstract

Regional concentration of population and economic activity is a common phenomenon both in Finland and the other most developed countries, which refers to the existence of agglomeration economies. Two types of economies are usually recognised to be important: specialisation (Marshall externalities) and diversity (Jacobs externalities) economies. The former refer to the geographical concentration of a specific industry and the latter to the industrial diversity of the local system. This paper examines the relationship between agglomeration economies and regional productivity in the manufacturing sector in Finland. A distinction is made between the effects of urbanisation and localisation economies. The production function method is applied to the manufacturing sub-sectors in the 83 NUTS 4-level regions in 1995 and 1999. The results find in favour of regional specialisation more than diversification even if some differences can be seen between the manufacturing sub-sectors. Localisation economies seem to be stronger in the regions where the average size of firms is small, which indicates that regions with smaller firms might profit more from localisation.

Suggested Citation

  • Kirsi Mukkala, 2003. "Agglomeration economies in the Finnish manufacturing sector," ERSA conference papers ersa03p361, European Regional Science Association.
    • Handle: RePEc:wiw:wiwrsa:ersa03p361
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    Cited by:

    1. Jennifer Day & Peter Ellis, 2013. "Growth in Indonesia's manufacturing sectors: Urban and localization contributions," Regional Science Policy & Practice, Wiley Blackwell, vol. 5(3), pages 343-368, August.

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