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This paper examines the relationship between urban agglomeration and firm innovation using a recently developed dataset that consistently measures city boundaries across Asia together with geo-referenced firm-level data. It finds that the spatial distribution of innovation by firms is highly concentrated within countries. Further, firms in larger cities have substantially higher propensities to introduce product and process innovations and to undertake R&D activities, a result that holds for subgroups of countries and even when the largest cities are excluded from the analysis. Finally, the presence of high-quality universities and highly ranked engineering departments in cities is positively associated with firm innovation, lending support to the idea that the accumulation of human capital locally is a key channel through which urban agglomeration affects innovation. [ABSTRACT FROM AUTHOR]

For two decades new economic geography has focused on ‘macro-heterogeneity’ across locations showing how this can be endogenously generated by the microeconomic decisions of identical people and firms. This paper argues that future research should look more deeply into finer ‘micro-heterogeneity’ across people and firms, shedding light on how the interactions between the two levels of heterogeneity affect the existence and the intensity of agglomeration economies. [ABSTRACT FROM PUBLISHER]

Where transport costs were falling, were the new economic geography forces for industry agglomeration and dispersion at work in the location of industry in pre-1931 Britain? This paper examines the issue empirically using a general model that nests the Heckscher-Ohlin factor endowment with new economic geography models. The evidence suggests that while the location of pre-1931 British industry was mainly driven by the former, the scale economies aspect of the latter also played a role. [ABSTRACT FROM AUTHOR]

There is clear evidence that economic activity, in particular industrial activity, is unequally located in Spain. Further, the results from the analysis of single manufacturing sectors show an even higher spatial concentration. The aim of this paper is to demonstrate the extent to which agglomeration economies account for this high industrial concentration. To this end, I analyse the influence of various types of agglomeration on the location of manufacturing employment in Spanish cities. I consider two types of agglomeration economies: urbanization economies (associated with a city's population and employment levels and the diversity of its productive structure) and localization economies (associated with a city's specialization in one specific sector). Special attention is given to the geographical unit of analysis by employing spatial econometric techniques that allow the influence of agglomeration effects extending beyond a city's limits to be considered. The results demonstrate that agglomeration economies influence the location of manufacturing activity, with most sectors being influenced by urbanization economies and a few by localization economies. In some sectors, population or employment levels in neighboring cities were found to enhance a city's agglomeration economies. [ABSTRACT FROM AUTHOR]

Several theoretical papers that examine tax competition with agglomeration effects have stressed the possibility that the governments of jurisdictions in which economic activity is concentrated may tax firms more heavily (taxable agglomeration rents). In this article, we examine the tax rate setting decisions taken with regard to the Spanish municipal business tax (Impuesto sobre Actividades Económicas). The analysis, carried out with a large sample of Spanish municipalities, focuses on the effect that urbanization economies and localization economies have on their business tax rates. High urbanization economies and localization economies are found to increase the business tax rate. [ABSTRACT FROM PUBLISHER]

This paper aims to explore the effect of regional differences on the performance of software firms in the Netherlands. Inspired by evolutionary economics, we account for the impact of: (1) co-location and sharing a local knowledge base; (2) pre-entry experience in the same or related industries; (3) being connected; and, (4) having organizational capabilities to cope with change. The outcomes of the regression analyses on data gathered among 265 software firms suggest that firms located in regions specialized in ICT have a higher innovative productivity. Spin-offs and firms with organizational capabilities also perform better, while network relationships do not affect the performance of software firms. [ABSTRACT FROM AUTHOR]

We estimate static and dynamic agglomeration effects on earnings among university graduates using Swedish longitudinal population register data. The prime interest lies with whether and how the dynamic effects of big city work experience vary by observed ability of workers and whether the effects are portable after relocation. Urban wage premium and spatial sorting of university graduates are analysed by using information on school grades, parental education and university rank. We find that the value of accumulated big city work experience increases with observed ability. The dynamic premium of working in bigger cities is not lost when moving to smaller cities, suggesting that it reflects learning effects and human capital accumulation. Our findings indicate systematic spatial sorting on observed indicators of ability as well as on unobserved productive traits. Sorting on unobserved abilities is driven primarily by graduates in the upper part of the observed ability distribution and is apparent also when taking dynamic learning effects into consideration. [ABSTRACT FROM AUTHOR]

The article accounts for the determinants of sectoral specialisation in business services (BS) across the EU-27 regions as determined by: (i) agglomeration economies (ii) the region-specific structure of intermediate linkages (iii) technological innovation and knowledge intensity and (iv) the presence of these factors in neighbouring regions. The empirical analysis draws upon the REGIO panel database over the period 1999–2003. By estimating a Spatial Durbin Model, we find significant spatial effects in explaining regional specialisation in BS. Our findings show that, besides urbanisation economies, the spatial structure of intermediate sectoral linkages and innovation, in particular Information and Communication Technologies (ICTs), are important determinants of specialisation in BS. The article contributes to the debate on the global versus local determinants of regional specialisation in BS by restating the importance of the regional sectoral structure besides that of urbanisation. We draw policy implications by rejecting the ‘footloose hypothesis’ for BS. [ABSTRACT FROM PUBLISHER]

Using data from a large sample of Italian manufacturing firms we provide novel empirical evidence on the magnitude of local productivity advantages in two types of spatially concentrated regions: urban areas (UAs) and industrial districts (IDs). A larger surplus is estimated for cities compared to industrial clusters, only partially related to the more skilled workforce employed in UAs. Over the last decade, the productivity premium of UAs has remained essentially unchanged, while that of IDs has showed a tendency to decline, suggesting that the former were better able to cope with the major shocks that hit the world economy. [ABSTRACT FROM PUBLISHER]

Using data from a large sample of Italian manufacturing firms we provide novel empirical evidence on the magnitude of local productivity advantages in two types of spatially concentrated regions: urban areas (UAs) and industrial districts (IDs). A larger surplus is estimated for cities compared to industrial clusters, only partially related to the more skilled workforce employed in UAs. Over the last decade, the productivity premium of UAs has remained essentially unchanged, while that of IDs has showed a tendency to decline, suggesting that the former were better able to cope with the major shocks that hit the world economy. [ABSTRACT FROM AUTHOR]

This article examines whether localized clusters of similar industries produce agglomeration economies in the formal and informal sectors. We develop a Bayesian method to estimate a spatial autoregressive model with an endogenous independent variable. We use establishment-level census data that cover both formal registered and informal unregistered establishments in Cambodia. We find that the density of local employment has a significantly positive effect on productivity in the informal sector, but little effect in the formal sector. For manufacturing, a doubling of employment density increases productivity in the informal sector by 9% through local linkages and by 19% through spatial multiplier linkages, leading to a 28% increase in total. A spatial network magnifies the local impact of agglomeration economies in the informal sector. [ABSTRACT FROM AUTHOR]

We use a dataset of Spanish exporters with rich spatial information to document the existence of agglomeration economies by export destination. More specifically, we show that, for a large set of export destinations, exporters are geographically too close to be the result of a random outcome. We also analyze the variables that explain the cross-destination heterogeneity in agglomeration. We find that firms selling to countries with worse institutions, a dissimilar language and a different currency are significantly more agglomerated. These results suggest that the value provided by agglomeration is higher concerning destinations where entry is more difficult. [ABSTRACT FROM AUTHOR]

In a continuous city with three distinct land use zones consisting of business, condominiums and detached houses, we derive the formulae which simultaneously optimize regulations on building size, lot size and the three zonal boundaries under the existence of agglomeration economies and traffic congestion. The formulae show that the optimal regulations require a combination of downward and upward adjustments to the market sizes of buildings within both the business zone and the condominium zone, followed by minimum lot size regulation in the housing zone. The outer boundaries of the condominium and housing zones should be regulated inward whereas the optimal business zone boundary regulation depends on the trade-off between agglomeration economies and traffic congestion costs. [ABSTRACT FROM AUTHOR]

This article uses an agent-based model of intercity firm location to explore the industrial composition of cities. Starting from a random allocation of firms across cities, firms relocate in pursuit of greater profit. There are several key results. First, there is a positive and nonlinear relationship between the strength of inter-industry external economies and coagglomeration, a result that supports using coagglomeration to study the microfoundations of agglomeration economies and to determine the boundaries of industry clusters. Second, the equilibrium level of coagglomeration is less than the efficient level. Third, history matters in the sense that a legacy of homogeneous or heterogeneous cities tilts the economy in favor of the historical pattern. Fourth, an increase in firm size increases coagglomeration. Fifth, an increase in relocation cost increases coagglomeration. [ABSTRACT FROM AUTHOR]

This article explores the effect of neighborhood land use on land use change in Mato Grosso, Brazil, one of the world's most dynamic agricultural frontiers. Using an innovative combination of spatial statistics and remotely sensed data, this research shows that the likelihood of an area being converted to agriculture is closely tied to how land is used in a location's surroundings. The results also suggest that this spatial spillover effect cannot be tied exclusively to the distribution of natural suitability characteristics. Rather, the likelihood of an area being converted to agriculture appears to reflect the dynamic socio-economic conditions of a location's surroundings. The findings imply that (i) agricultural agencies or experts seeking to support developing agricultural regions should recognize the importance of returns to scale and local clustering and that (ii) land use modeling can be improved by accounting for suitability and land uses in nearby locations. [ABSTRACT FROM AUTHOR]

The conversation between economic geographers and political economists has not made much progress. The former focus on exchange, markets and efficiency, as can be seen in work on urban economies. We want the field to pay more attention to two processes crucial to the growth of cities often lying outside market exchange and agglomeration economies: how resources are managed across time and space and how the urban environment creates challenges demanding collective responses. We first make the case for the two processes using historical examples and then argue for the importance of similar processes today. We do not propose to make a definitive argument, but rather to challenge economic geographers with an expanded research agenda for the future. [ABSTRACT FROM AUTHOR]

Individual earnings are higher in bigger cities. We consider three reasons: spatial sorting of initially more productive workers, static advantages from workers' current location, and learning by working in bigger cities. Using rich administrative data for Spain, we find that workers in bigger cities do not have higher initial unobserved ability as reflected in fixed effects. Instead, they obtain an immediate static premium and accumulate more valuable experience. The additional value of experience in bigger cities persists after leaving and is stronger for those with higher initial ability. This explains both the higher mean and greater dispersion of earnings in bigger cities. [ABSTRACT FROM AUTHOR]

This article measures the spatial heterogeneity of the costs of the economic crisis and assesses the role of cities as sources of regional resilience in Europe. Cities hosting financial activities have been severely hit during the crisis; however, they also host hard and soft territorial capital elements--high physical accessibility, access to information and knowledge, advanced functions, agglomeration economies--generating intersectoral productivity growth and the ability to adjust to the crisis. A scenario approach is used to capture the long term costs of the crisis, applying a new version of a macroeconometric regional growth forecasting model (MASST), recently updated to take account of the crisis. Results show that cities play a role in the resilience of regions; the quality of production factors hosted, the density of external linkages and cooperation networks and the quality of urban infrastructure give greater economic resilience to cities, and to the regions hosting them. [ABSTRACT FROM AUTHOR]

Modern central business districts are characterized by high-rise office buildings, but their presence cannot be explained by standard urban economic models only. We aim to explore the impact of other forces that explain the presence of tall buildings, by examining the existence of a building height premium. We find that Dutch firms are willing to pay on average about 4% more for a building that is 10 m taller, implying a substantial premium associated with tall buildings. This premium is thought to be due to a combination of a within-building agglomeration economies, a landmark and a view effect. Given functional form assumptions on the agglomeration effect, the results suggest that the sum of the landmark and view effect is about 2.8–5.5% of the rent for a building that is five times the average height. [ABSTRACT FROM PUBLISHER]

This article argues that investing in a wide range of city sizes, or a portfolio of places, can be more conducive to growth than primarily investing in the largest city. A range of cities allows each firm to find its optimal city. This reduces the needed size of cities and thus congestion costs. Less-developed European Union Member States have large and growing productivity gaps between their capitals compared with the rest of the country. More-developed Member States have much smaller productivity gaps. Therefore, growth in the second-tier cities in less-developed Member States is likely to outpace growth in the capital in the medium term, yet public investment may be too focused on the capital city. [ABSTRACT FROM AUTHOR]

I present a stylized theory of regional development in which regional ‘first nature’ characteristics do not map uniquely into regional outcomes. The ‘second nature’ force is social learning about fixed but unknown regional characteristics which can bring about self-reinforcing regional development. The key difference from other agglomeration economies is that the extent of local economic activity only influences beliefs about productivity but not actual productivity so that there are no localized external increasing returns. [ABSTRACT FROM PUBLISHER]

We assess the extent to which firms in an environment of decreasing transport costs and industrial transformation value the benefits of proximity to a historic central business district (CBD) and agglomeration economies in their location decisions. Taking a hybrid perspective of classical bid-rent theory and a world where clustering of economic activity is driven by between-firm spillovers, Berlin, Germany, from 1890 to 1936 serves as a case in point. Our results suggest that the average productivity effect of a doubling of between-firm spillovers over the study period increases from 3.5% to 8.3%. As the city transforms into a service-based economy, several micro-agglomerations emerge. Their locations close to the CBD still make the city look roughly monocentric. This is in line with a hysteresis effect in which second-nature geography drives the ongoing strength of a historic city center even though the importance of the originally relevant first-nature geography has vanished. [ABSTRACT FROM PUBLISHER]

A widespread assumption in economic geography and the economics of innovation is that firms located in clusters benefit from territorial learning and knowledge spillovers. However, it remains unclear to what extent these benefits actually occur. This article aims to address this issue and examines to what extent research and development workers in the Cambridge Information Technology Cluster benefit from being located in the Cluster. The study shows why many do not believe that their work benefits from being located in the Cluster. The results suggest that academics as well as policy makers need to be more careful with the assumption of technological knowledge spillovers in innovative clusters. The significant advantages of the Cambridge IT Cluster seem to be of a different nature; in particular they concern labour market advantages and benefits from the global ‘brand’ of Cambridge. [ABSTRACT FROM AUTHOR]

Urban economic theory points to one measure of agglomeration economies, namely differential land rent in intense clusters of economic activity. The empirical basis for this research is commercial office rents in major office markets of the USA. Using panel data, we estimate models of changes in real office rents for 120 major office markets, in 49 MSAs, over 18 years. Our variable reflecting agglomeration economies is changes in producer service employment. Our results suggest that there are agglomeration economies in CBDs of the larger metropolitan office markets but not in the smaller, and not in any suburban office markets. [ABSTRACT FROM PUBLISHER]

Measures of urban productivity are typically positively associated with city population. But is this relationship causal? We discuss the main sources of bias in the proper identification of agglomeration effects. We also assess a variety of solutions that have been proposed in the literature to deal with them. [ABSTRACT FROM PUBLISHER]

This article analyses the impact of labour market-induced externalities on firm performance by using a unique database that connects attributes of individuals to workplaces for the entire Swedish economy. Based on the analysis of 256,985 workplaces, our results show that firms belonging to networks of local job mobility (i.e. 'localized mobility clusters') significantly outperform other similar firms within the local labour market. The results also indicate that concentrations of similar and related firms do not explain any considerable part of the variations in firm competitiveness. Labour market externalities derived via local job mobility produce significantly more powerful effects for the involved firms as compared to the degree of co-location, diversity and scale. [ABSTRACT FROM AUTHOR]

The government wants 3m houses built by 2020. Economic theory tells us their locations matter for living standards. Economics cannot tell us the optimal locations, but does show that houses are usually socially more valuable in high land-price areas, because additional workers are more productive in such places. Land-price data and evidence on urban agglomeration economies point to a significant rise in the optimal sizes of some UK cities and that optimal locations have moved from industrial-revolution cities towards the South-east. As a result, significantly expanding London, its commuter satellites, and other high-skill places in the UK, but particularly in the South-east, is likely to generate substantial rises in wages and living standards. In these places the planning system dramatically constrains the economy from responding with nineteenth-century dynamism, when new economic opportunities led some towns to grow dramatically. [ABSTRACT FROM AUTHOR]

During the past 15 years, Swedish higher education policy has emphasized the spatial decentralization of post-secondary education. We investigate the economic effects of this decentralization policy on productivity and output per worker. We rely upon a 14-year panel of output and employment for Sweden's 285 municipalities, together with data on the location of university-based researchers and students, to estimate the effects of exogenous changes in educational policy upon regional development. We find important and significant effects of this policy upon the average productivity of workers, suggesting that the economic effects of the decentralization on regional development are economically important. We also find evidence of highly significant, but extremely localized, externalities in productivity. This is consistent with recent findings (e.g., Rosenthal and Strange, 2003) on agglomeration in 'knowledge industries.' [ABSTRACT FROM AUTHOR]