Market Selection and Regional Diversification - Empirical Regularities from German Panel-Data
Several theoretical approaches to explaining economic growth focus on externalities arising from interactions between economic agents. A frequently discussed source of such externalities is regional diversity of the industry structure. A large number of empirical studies support the argument that regional diversity can be beneficial to regional employment, innovation, and economic stability. It is not particularly surprising that diversity in the industry structure can be assumed to depend, in part, on the activity of new businesses. To date, however, little is known about the roles and paths new businesses take in the diversification of the industry structure. The central questions that this paper attempts to answer are how the market selection process influences the diversity of entries and how start-up activity influences diversity in the region and beyond. For an analysis of diversity patterns, we use regional data for West Germany over a 27-year period that includes specifics about employment at the industry level and allows us to distinguish and follow entry cohorts over time. Compared with the large amount of literature analyzing whether diversity or specialization is conducive to regional development, the literature discussing trends of regional diversification is rather limited. The preliminary results of this study can be summarized as follows. On the whole, regional diversity moderately increased over the last decades. Regional diversity and region size are related via an inverse u-shape. Establishment scale is negatively related to diversity. In addition, evidence supports that regional diversity increases with the number of entries but decreases with the number of exits. Modest specialization is positively associated. Certain empirical regularities for the role of entries are: Employment diversity in entries is increasing over time at the national level, while diversity at the regional level is decreasing on average. This antipodal development of diversity can be explained by a market selection favoring a diverse set of specializations at the regional level. Despite the decrease in regional diversity in entry cohorts over time, these entries contribute to an increase in total regional diversity due to a selection within entry cohorts that substantially differs from the existing regional industry structure.
|Date of creation:||Sep 2011|
|Date of revision:|
|Contact details of provider:|| Postal: |
Web page: http://www.ersa.org
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- BARRIOS, Salvador & BERTINELLI, Luisito & STROBL, Eric & TEIXEIRA, Antonio Carlos, 2004.
"The dynamics of agglomeration : evidence from Ireland and Portugal,"
CORE Discussion Papers
2004010, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Barrios, Salvador & Bertinelli, Luisito & Strobl, E. & Teixeira, Antonio-Carlos, 2005. "The dynamics of agglomeration: evidence from Ireland and Portugal," Journal of Urban Economics, Elsevier, vol. 57(1), pages 170-188, January.
- Barrios, Salvador & Bertinelli, Luisito & Strobl, Eric & Teixeira, Antonio Carlos, 2004. "The dynamics of Agglomeration: Evidence from Ireland and Portugal," MPRA Paper 5706, University Library of Munich, Germany.
- Andersson, Roland & Quigley, John. M & Wilhelmsson, Mats, 2005.
"Agglomeration and the Spatial Distribution of Creativity,"
Working Paper Series in Economics and Institutions of Innovation
42, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
- Roland Andersson & John M. Quigley & Mats Wilhelmsson, 2005. "Agglomeration and the spatial distribution of creativity," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 445-464, 08.
- Andersson, Roland & Quigley, John M. & Wilhelmsson, Mats, 2005. "Agglomeration and the Spatial Distribution of Creativity," Berkeley Program on Housing and Urban Policy, Working Paper Series qt1wd73461, Berkeley Program on Housing and Urban Policy.
- Joshua Drucker, 2009. "Trends in Regional Industrial Concentration in the United States," Working Papers 09-06, Center for Economic Studies, U.S. Census Bureau.
- Salvador Barrios & Luisito Bertinelli & Eric Strobl, 2006. "Geographic Concentration And Establishment Scale: An Extension Using Panel Data," Journal of Regional Science, Wiley Blackwell, vol. 46(4), pages 733-746.
- J. Vernon Henderson & Ari Kuncoro & Matthew Turner, 1992.
"Industrial Development in Cities,"
NBER Working Papers
4178, National Bureau of Economic Research, Inc.
- John E. Wagner & Steven C. Deller, 1998. "Measuring the Effects of Economic Diversity on Growth and Stability," Land Economics, University of Wisconsin Press, vol. 74(4), pages 541-556.
- Guy Dumais & Glenn Ellison & Edward L. Glaeser, 2002.
"Geographic Concentration As A Dynamic Process,"
The Review of Economics and Statistics,
MIT Press, vol. 84(2), pages 193-204, May.
- Guy Dumais & Glenn Ellison & Edward Glaeser, 1997. "Geographic Concentration as a Dynamic Process," NBER Working Papers 6270, National Bureau of Economic Research, Inc.
- Guy Dumais & Glenn Ellison & Edward L Glaeser, 1998. "Geographic Concentration as a Dynamic Process," Working Papers 98-3, Center for Economic Studies, U.S. Census Bureau.
- Feldman, Maryann P. & Audretsch, David B., 1999.
"Innovation in cities:: Science-based diversity, specialization and localized competition,"
European Economic Review,
Elsevier, vol. 43(2), pages 409-429, February.
- Audretsch, David B & Feldman, Maryann P, 1998. "Innovation in Cities: Science-Based Diversity, Specialization and Localized Competition," CEPR Discussion Papers 1980, C.E.P.R. Discussion Papers.
- Paul Cavelaars, 2005. "Has the Tradeoff Between Productivity Gains and Job Growth Disappeared?," Kyklos, Wiley Blackwell, vol. 58(1), pages 45-64, 02.
- Thomas J. Holmes & John J. Stevens, 2002. "Geographic Concentration and Establishment Scale," The Review of Economics and Statistics, MIT Press, vol. 84(4), pages 682-690, November.
- Federico Cingano & Fabiano Schivardi, 2004.
"Identifying the Sources of Local Productivity Growth,"
Journal of the European Economic Association,
MIT Press, vol. 2(4), pages 720-742, 06.
- Federico Cingano & Fabiano Schivardi, 2003. "Identifying the Sources of Local Productivity Growth," Temi di discussione (Economic working papers) 474, Bank of Italy, Economic Research and International Relations Area.
- Attaran, Mohsen, 1986. "Industrial Diversity and Economic Performance in U.S. Areas," The Annals of Regional Science, Springer, vol. 20(2), pages 44-54, July.
- John R. Kort, 1981. "Regional Economic Instability and Industrial Diversification in the U.S," Land Economics, University of Wisconsin Press, vol. 57(4), pages 596-608.
- Lynch, Lawrence K., 1979. "Economic Structure and Economic Performance: Some Evidence for States," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 9(1).
When requesting a correction, please mention this item's handle: RePEc:wiw:wiwrsa:ersa10p1117. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Gunther Maier)
If references are entirely missing, you can add them using this form.