Agglomeration Economies in Small Cities and Business: The Impact of the Great Recession in Aragón (Spain)

Rafael González-Val,Miriam Marcén

doi:10.3390/su11143770

Rafael González-Val, Miriam Marcén

Open Access

https://doi.org/10.3390/su11143770

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Journal: Sustainability	Publication Date: Jul 10, 2019
Citations: 3	License type: CC BY 4.0

Affiliation: Universidad de Zaragoza, University of Barcelona

Abstract

In this paper, we analyze the effects of productive specialization and productive diversity on employment growth at the local level during the Great Recession in Aragon, a NUTS II region in Spain. This region is characterized by (i) a high population density in the capital city (around half of the total population), giving rise to a very uneven population distribution and therefore a lot of small cities and municipalities, and (ii) a large proportion of small businesses (95% of the firms in this region have fewer than ten employees). We use annual data from 2000 to 2015 and panel data models, and grouped local business activities into three main categories: industry, construction and services. Our results show that, during this period, local specialization in any of these activities hurt local employment growth, whereas diversity had a non-significant effect on employment growth. Only in the case of services did we obtain a positive effect of diversity on local employment growth, which was restricted to the most populated cities (i.e., cities with more than 3000 inhabitants). Therefore, only diversity in services activities located in large cities contributed to employment growth during the Great Recession.

Highlights

The last few years of Spanish economic history have been convulsive, with a series of events that generated high unemployment rates and negative economic growth (Banco de España [1])
Only diversity in services activities located in large cities contributed to employment growth during the Great Recession
We test the strength of agglomeration economies for a Spanish region characterized by its small cities and companies

Summary

Introduction

The last few years of Spanish economic history have been convulsive, with a series of events (an economic crisis, a financial crisis, and a sovereign debt crisis) that generated high unemployment rates and negative economic growth (Banco de España [1]). The current recovery phase is characterized by intense job creation and economic growth, during the worst years of the crisis (2012–2013), unemployment rates were above 25%, leaving Spain with the second-highest unemployment rate in Europe (after Greece), which was triple that of the pre-crisis period, 8.3% in 2006 (source: Spanish National Institute of Statistics, Instituto Nacional de Estadística). We focus on job growth in Aragón, one of the NUTS 2 regions of Spain, called Autonomous Communities (NUTS regions are the European Union’s standard classification of European regions at different geographical levels of aggregation (1, 2, and 3); the acronym NUTS comes from the French term Nomenclature des unités territoriales statistiques). Unemployment levels are more volatile in Teruel than in the other two provinces

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