Clustering Of Economic Activity Research Articles

Spillovers from universities: Evidence from the land-grant program

This paper estimates the short- and long-run effects of universities on geographic clustering of economic activity, labor market composition and local productivity and presents evidence of local spillovers from universities. I treat the designation of land-grant universities in the 1860s as a natural experiment after controlling for the confounding factors with a combination of synthetic control methods and event-study analyses. Three key results are obtained. First, the designation increased local population density by 6 percent within 10years and 45 percent in 80years. Second, the designation did not change the relative size of local manufacturing sector. Third, the designation enhanced local manufacturing output per worker by $2136 (1840 dollars; 57 percent) in 80years while the short-run effects were negligible. This positive effect on the productivity in non-education sectors suggests the existence of local spillovers from universities. Over an 80-year horizon, my results indicate that the increase in manufacturing productivity reflects both the impact of direct spillovers from universities and general agglomeration economies that arise from the increase in population.

All access: a micro-level case study on the secondary center of Berlin (1871–1936)

In an empirical analysis, I show that in the case of Berlin, Germany (1871–1936), the emergence of the second CBD during the first half of the past century was largely driven by market access generated by rail-based public transport. By applying a multistep measure of accessibility, it can be shown that while the city brought-up several economic centers simultaneously, the area around the Kurfurstendamm revealed a strong initial advantage leading to a rapid clustering of economic activity that consisted even decades after this advantage had vanished (hysteresis effect).

Mapping geographical concentrations of economic activities in Europe using light at night (LAN) satellite data

Data on geographical concentrations of economic activities, such as manufacturing, construction, wholesale and retail trade, financial services, etc., are important for identifying clusters of economic activities (EAs) and concentrations of forces behind them. However, such data are essentially sparse due to limited reporting by individual countries and administrative entities. For example, at present, Eurostat provides EA data for <50% of all regional subdivisions of the third tier of the Nomenclature of Territorial Units for Statistics (NUTS3). Measurements of light at night (LAN), as captured by satellite sensors, are likely to differ in intensity, depending on the source. As a result, LAN levels can become a marker for EAs; the present study attempts to verify this possibility. As the present analysis indicates, the inclusion of LAN intensities in multivariate models (in addition to standard economic and locational variables) helps to explain up to 88.8% of the EA variation, performing especially well for manufacturing, construction, and agriculture (the adjusted coefficient of determination (R2-adjusted) is in the range of 0.754–0.888). The study thus confirms the feasibility of using LAN satellite measurements for reconstructing geographical patterns of EAs, information that may be restricted or is unavailable due to sparse or incomplete reporting.

Detecting and interpreting clusters of economic activity in rural areas using scan statistic and LISA under a unified framework

AbstractThe primary aim of this paper is to expose the use and the value of spatial statistical analysis in business and especially in designing economic policies in rural areas. Specifically, we aim to present under a unified framework, the use of both point and area‐based methods, in order to analyze in‐depth economic data, as well as, to drive conclusions through interpreting the analysis results. The motivating problem is related to the establishment of women‐run enterprises in a rural area of Greece. Moreover, in this article, the spatial scan statistic is successfully applied to the spatial economic data at hand, in order to detect possible clusters of small women‐run enterprises in a rural mountainous and disadvantaged region of Greece. Then, it is combined with Geographical Information System based on Local Indicator of Spatial Autocorrelation scan statistic for further exploring and interpreting the spatial patterns. The rejection of the random establishment of women‐run enterprises and the interpretation of the clustering patterns are deemed necessary, in order to assist government in designing policies for rural development. Copyright © 2014 John Wiley &amp; Sons, Ltd.

The Power of Hydroelectric Dams: Agglomeration Spillovers

How much of the geographic clustering of economic activity is attributable to agglomeration spillovers as opposed to natural advantages? I present evidence on this question using data on the long-run effects of large scale hydroelectric dams built in the U.S. over the 20th century, obtained through a unique comparison between counties with or without dams but with similar hydropower potential. Until mid-century, the availability of cheap local power from hydroelectric dams conveyed an important advantage that attracted industry and population. By the 1950s, however, these advantages were attenuated by improvements in the efficiency of thermal power generation and the advent of high tension transmission lines. Using a novel combination of synthetic control methods and event-study techniques, I show that, on average, dams built before 1950 had substantial short run effects on local population and employment growth, whereas those built after 1950 had no such effects. Moreover, the impact of pre-1950 dams persisted and continued to grow after the advantages of cheap local hydroelectricity were attenuated, suggesting the presence of important agglomeration spillovers. Over a 50 year horizon, I estimate that at least one half of the long run effect of pre-1950 dams is due to spillovers. The estimated short and long run effects are highly robust to alternative procedures for selecting synthetic controls, to controls for confounding factors such as proximity to transportation networks, and to alternative sample restrictions, such as dropping dams built by the Tennessee Valley Authority or removing control counties with environmental regulations. I also find small local agglomeration effects from smaller dam projects, and small spillovers to nearby locations from large dams.

DOES FIRM OWNERSHIP AFFECT SPILLOVER OPPORTUNITIES? EVIDENCE FROM CHINESE MANUFACTURING

ABSTRACTThe clustering of economic activity is believed to generate both positive own‐industry (localization) spillovers and negative competitive pressures. Using data on manufacturing enterprises operating in China during 1998–2006, this paper provides evidence on the net effect of opposing spillovers from nearby economic activity. Central to the analysis is the opportunity to distinguish local manufacturing enterprises by state, private, or foreign ownership. Systematic differences in average productivity of these firms enable inferences about differences in the strength of spillovers from one type of firm to another type. Results indicate that spillovers are larger within the same ownership type than they are across them, consistent with localization economies that operate within segmented channels of influence.

The effect of agglomeration size on local taxes

Standard tax competition models predict a ‘race-to-the-bottom’ of corporate tax rates when firms are mobile. Recent theoretical literature shows that central regions with large clusters of economic activity are able to set positive tax rates without fear of losing firms to peripheral regions as the firms would forego ‘rents’ from agglomeration economies. We study whether local policy makers effectively tax such agglomeration rents. We test this with data from Swiss municipalities. We find that municipalities in large urban areas indeed set higher tax rates than those in small ones. Within urban areas, however, municipal tax rates are unrelated to the size of economic activity in and around municipalities while they are positively related to the size of the political jurisdiction. We see this result as evidence that the standard tax competition model for asymmetric jurisdictions is at work in the competition of municipalities within an urban area.

Reflections on cluster policies

Economic activity tends to cluster. This results in productivity gains. For policy makers this offers an opportunity to formulate and promote policies that foster clustering of economic activity. Paradoxically, although agglomeration rents are often found in empirical research, a rationale for cluster policies does not exist. A brief tour through the literature shows that cluster policies face more problems than is often assumed in policy circles. We reflect on the main issues at stake and conclude that, if not carefully applied, cluster policy may do more harm than good.

Regional Implications of Financial Market Development: Credit Rationing, Trade, and Location

We develop a heterogeneous-firms model with trade in goods, labor mobility and credit constraints due to moral hazard. Mitigating financial frictions reduces the incentive of high-skilled workers to migrate to one region such that an unequal distribution of industrial activity becomes less likely. Hence, financial market development has opposite regional implications as trade liberalization. While the former leads to more dispersion of economic activity across space, the latter tends to drive clustering. We provide empirical evidence for this hypothesis by combining industry-region variation in the spatial concentration of economic activity with information on the access to credit and the dependence on external finance. Our estimates for 20 European countries and eleven industries confirm that financial market development mitigates the clustering of economic activity.

Weighting Ripley’s K-Function to Account for the Firm Dimension in the Analysis of Spatial Concentration

The spatial concentration of firms has long been a central issue in economics under both the theoretical and the applied point of view mainly due to the important policy implications. A popular approach to its measurement, which does not suffer from the problem of the arbitrariness of the regional boundaries, makes use of micro data and looks at the firms as if they were dimensionless points distributed in the economic space. However, in practical circumstances the points (firms) observed in the economic space are far from being dimensionless and are conversely characterized by different dimension in terms of the number of employees, the product, the capital, and so on. In the literature, the works that originally introduce such an approach disregard the aspect of the different firm dimension and ignore the fact that a high degree of spatial concentration may result from the case of both many small points clustering in definite portions of space and only few large points clustering together (e.g., few large firms). We refer to this phenomenon as clustering of firms and clustering of economic activities. The present article aims at tackling this problem by adapting the popular K-function to account for the point dimension using the framework of marked point process theory.

How polycentric is a monocentric city? Centers, spillovers and hysteresis

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 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.

The Industrial Cluster Concept in Regional Economic Development Prospective: A Literature Review

The concept of clustering and the existence of clusters have centuries old history in the world economy. In recent years the concept has gained prominence in the theory and practice of economic development. In a wide range of academic disciplines and in policy circles, cluster concept and its impact on regional economic development have generated an extraordinary degree of interest. The success of cluster concept in improving regional economies has been widely accepted. It is now acknowledged that fostering industry clusters can create the underpinnings for sustainable competitiveness. Till date, a number of attempts have been made to explain how the clustering of economic activities and clusters of industries can be a key source of competitive advantage for a region. The present paper highlights the link between the concepts of industrial clusters and regional economic development through discussion of the available literature.

Competencies required by port personnel in the new era: conceptual framework and case study

Nowadays, ports have transformed from a purely ship-shore interface into logistical platforms where logistics-related activities occur, and are also important clusters of economic activities. The role of seaports is therefore essential since these transport nodes are important and indispensable for the effective and efficient management of flows of products and information in the supply chain. With this new role, it is critical that port personnel possess necessary competencies to contribute to port efficiency and turn the port into an effective supply chain partner. This research issue is explored through a conceptual model of competencies constructed based on thorough literature review and in-depth interviews and validated by a survey with port personnel both in Singapore and Vietnam. As a result, important managerial insights are drawn to the design and implementation of human resource development policy for ports.

Geographies of scope: an empirical analysis of entertainment, 1970-2000

The geographic clustering of economic activity has long been understood in terms of economies of scale across space. This paper introduces the construct of geographies of scope, which we argue is driven by substantial, large-scale geographic concentrations of related skills, inputs and capabilities. We examine this through an empirical analysis of the entertainment industry across US metropolitan areas from 1970 to 2000. Our findings indicate that geographies of scope (or collocation among key related entertainment subsectors and inputs) explain much of the economic geography of entertainment even when scale is controlled for, though our regressions over time suggest the role of scope is decreasing. Furthermore, we find that the entertainment sector as a whole and its key subsectors are significantly concentrated in two superstar cities—New York and Los Angeles—far beyond what their population size (or scale effects) can account for, while the pattern falls off dramatically for other large regions.

The importance of agglomeration effects for distribution centres around Amsterdam Airport Schiphol

Amsterdam Airport Schiphol is a main European airport and represents an important concentration of European distribution centres (EDCs). It is commonly assumed that distribution centres are attracted to the airport region because of its air transport services. However, if one considers economies of agglomeration, whereby the geographical clustering of economic activities can result in increasing returns, it is quite possible that a significant amount of EDCs have been established near Schiphol for non-airport related reasons. To this end, the present paper investigates agglomeration effects for distribution centres around Schiphol. It reports on two cross-sectional surveys: one of the EDCs around Schiphol and one of the total Dutch population of EDCs. The study finds that economies of agglomeration — and not the air transport services themselves — are in fact the most important location forces responsible for the attraction of EDCs into the Schiphol area. This result shows that Amsterdam-Schiphol is more than simply a transport hub. Correspondingly, the major role of agglomeration effects should be recognised in future policy to manage and control the economic development of the airport area.

Detecting the existence of space–time clustering of firms

The use of the K-functions (Ripley, 1977) has recently become popular in the analysis of the spatial pattern of firms. It was first introduced in the economic literature by Arbia and Espa (1996) and then popularized by Marcon and Puech (2003), Quah and Simpson (2003), Duranton and Overman (2005), and Arbia et al. (2008). In particular in Arbia et al. (2008) we used Ripley's K-functions as instruments to study the inter-sectoral co-agglomeration pattern of firms in a single moment of time. All this research has followed a static approach by disregarding the time dimension. Temporal dynamics, on the other hand, play a crucial role in understanding the economic and social phenomena particularly when referring to the analysis of the individual choices leading to the observed clusters of economic activities. With respect to previous contributions to the literature, this paper uncovers the process of firm demography by studying the dynamics of localization through space–time K-functions. The empirical part of the paper will focus on the study of the long run localization of firms in the area of Rome (Italy), by concentrating on the Information and Communication Technology ( ICT) sector data collected by the Italian Industrial Union in the period 1920–2005.

Do Clusters Make a Difference? Defining and Assessing their Economic Performance

Spencer G. M., Vinodrai T., Gertler M. S. and Wolfe D. A. Do clusters make a difference? Defining and assessing their economic performance, Regional Studies. This paper contributes to the literature on cluster dynamics by developing a new methodology for identifying clusters that is not dependent on United States-based definitions. This methodology is used to test if the geographical clustering of economic activities leads to superior industrial performance and regional competitiveness. The analysis produces two important findings. First, when industries locate in an urban region with a critical mass of related industries, they tend to generate both higher incomes and rates of employment growth. Second, the overall prevalence of clustering within a city-region is positively associated with income levels and employment growth. Spencer G. M., Vinodrai T., Gertler M. S. et Wolfe D. A. Les grappes, qu'est-ce qu'elles changent? Définir et évaluer leur performance économique, Regional Studies. Cet article cherche à contribuer à la documentation sur la dynamique des grappes en développant une nouvelle méthodologie qui identifie les grappes et qui ne dépend pas des définitions américaines. On se sert de cette méthodologie afin d'évaluer si, oui ou non, le regroupement géographique des activités économiques entraîne une meilleure performance industrielle et une compétitivité régionale accrue. Il s'avère deux conclusions importantes. Primo, au moment où les industries s'installent dans une zone urbaine dotée d'un nombre critique d'industries qui s'y rattachent, elles ont tendance à créer à la fois des revenus et des taux de croissance de l'emploi plus élevés. Secundo, la tendance globale au regroupement au sein d'une cite-région est étroitement liée au niveau des revenus et à la croissance de l'emploi. Grappes Emplacement industriel Compétitivité Performance économique Aménagement du territoire Canada Spencer G. M., Vinodrai T., Gertler M. S. und Wolfe D. A. Machen Cluster einen Unterschied? Definition und Bewertung ihrer Wirtschaftsleistung, Regional Studies. In diesem Beitrag zur Literatur über Cluster-Dynamik entwickeln wir eine neue Methodologie zur Identifizierung von Clustern unabhängig von den Definitionen der USA. Anhand dieser Methodologie überprüfen wir, ob die geografische Ballung wirtschaftlicher Aktivitäten zu einer überlegenen industriellen Leistung und regionalen Wettbewerbsfähigkeit führt. Unsere Analyse führt zu zwei wichtigen Ergebnissen. Erstens: Wenn sich Branchen in einer urbanen Region mit einer kritischen Masse zugehöriger Branchen ansiedeln, erzeugen sie tendenziell höhere Einkommen und Raten von Beschäftigungswachstum. Zweitens: Die generelle Prävalenz von Clustern innerhalb einer Stadtregion hängt positiv mit der Einkommenshöhe und dem Beschäftigungswachstum zusammen. Cluster Industriestandort Konkurrenzfähigkeit Wirtschaftsleistung Regionale Wirtschaftsentwicklung Kanada Spencer G. M., Vinodrai T., Gertler M. S. y Wolfe D. A. ¿Marcan las aglomeraciones una diferencia? Definición y valoración del rendimiento económico, Regional Studies. En este artículo contribuimos a la literatura sobre las dinámicas de aglomeración al desarrollar una nueva metodología para identificar las aglomeraciones que no depende de las definiciones que proceden de los Estados Unidos. Mediante esta metodología comprobamos si es posible obtener mejoras en el rendimiento industrial y la competitividad regional con una aglomeración geográfica de las actividades económicas. Nuestro análisis arroja dos importantes resultados. Primero: cuando las industrias están ubicadas en un región urbana con una masa crítica de industrias relacionadas, tienden a generar tanto ingresos más altos como tasas superiores de crecimiento de empleo. Segundo: la prevalencia general de aglomeración en una región metropolitana está positivamente asociada a niveles de ingresos y crecimiento de empleo. Aglomeraciones Ubicación industrial Competitividad Rendimiento económico Desarrollo económico regional Canadá

Teaching and Learning Guide for: Environmental Economic Geography

environment. Likewise,modern (post-1960) economic geography largely sub-disciplined itself around aninterest in employment (e.g. industrial geography) or in nature (e.g. environmentalgeography). Fortunately, the nature of the debate is changing rapidly andpolitical, business and environmental leaders have recognized that economicdevelopment and environmental sustainability, the two central challenges facingthe world in the twenty-first century, depend on each other as potentially mutuallycompatible imperatives. Recognition that economic evolution is driven byinnovations of all kinds that restructure relations between economy and environmentsupports this view. If these restructurings have been overwhelmingly negative forthe environment in the past, a re-calibration of institutional and technologicalinnovation towards a Green Paradigm that seeks to realize positive sum relationshipsbetween economy and environment is feasible. Moreover, a Green Paradigm needsto be both global in scope and sensitive to geographically uniqueness. Economy–environment relationships are distinctive in particular places and connected acrossspace; climate warming, for example, is a global phenomenon in which processesand outcomes are locally varied. The vital role for environmental economicgeography is to assess how place and space influence economy–environmentrelations that are site-specific, globally interdependent and multi-scalar, and toprescribe (local–global) relations that will realize economic and environmentalvalues. Normatively, with respect to the achievement of economic and environ-mental values: How should innovation systems be organized globally and locally?What is the proper distribution of economic activities? How should cities andresource peripheries be remapped? How should value chains that directly andindirectly link multi-faceted (resource, manufacturing and service activities)activities in the supply of goods and services for consumers best be organizedlocally and globally? These are some of the fascinating questions facing environmentaleconomic geography.

Urban Economies and Productivity

Productivity levels and productivity growth rates vary significantly over space. These differences are perhaps most pronounced between countries, but they remain acutely evident within national spaces as economic growth favors some cities and regions and not others. In this paper, we map the spatial variation in productivity levels across Canadian cities and we model the underlying determinants of that variation. We have two main goals. First, to confirm the existence, the nature and the size of agglomeration economies - that is, the gains in efficiency related to the spatial clustering of economic activity. We focus attention on the impacts of buyer-supplier networks, labour market pooling and knowledge spillovers. Second, we identify the geographical extent of knowledge spillovers using information on the location of individual manufacturing plants. Plant-level data developed by the Micro-economic Analysis Division of Statistics Canada underpin the analysis. After controlling for a series of plant and firm characteristics, analysis reveals that the productivity performance of plants is positively influenced by all three of Marshall's mechanisms of agglomeration. The analysis also shows that the effect of knowledge spillovers on productivity is spatially circumscribed, extending, at most, only 10 km beyond individual plants. The reliance of individual businesses on place-based economies varies across the sectors to which the businesses are aggregated. These sectors are defined by the factors that influence the process of competition - access to natural resources, labour costs, scale economies, product differentiation, and the application of scientific knowledge. Neither labour market pooling, buyer-supplier networks nor knowledge spillovers are universally important across all sectors. This paper provides confirmation of the importance of agglomeration, while also providing evidence that external economies are spatially bounded and not universally important across all industries.

The Spatial Distribution of Economic Activities in Italy

Existing indices measuring the spatial distribution of economic activity such as the Krugman Specialisation Index, the Hirschmann-Herfindahl index and the Ellison-Glaeser index typically do not take into account the spatial structure of the data. In this paper, we first consider traditional measures of geographical concentration, and subsequently extend the analysis to take spatial dependence into account. Using data for Italy for the years 1991 and 2001, we apply exploratory spatial data analysis to identify sectoral location patterns in both the manufacturing industry as well as in services. We find that large differences prevail in the geographical concentration of production across sectors. The results of the exploratory spatial data analysis reveal the existence of well- defined clusters of economic activities.