The Economic Microgeography of Diversity and Specialization

Martin Andersson, Johan Larsson and Joakim Wernberg

No 1167, Working Paper Series from Research Institute of Industrial Economics

Abstract: As cities increasingly become centers of economic growth and innovation, there is a need to understand their inner workings and organization in greater detail. We use ge-coded firm-level panel data at the sub-city level to assess the long-standing question whether agglomeration economies derive from specialization (within-industry) or diversity (between-industry). We show that these two types of externalities co-exist, but differ in their spatial distribution and attenuation within cities. There are robust positive effects of diversity and specialization on firms’ TFP growth at the local within-city neighborhood level, especially for firms in high-tech and knowledge-intensive activities. While specialization effects are bound to the local sub-city level, we demonstrate a positive effect of overall diversity also at the city-wide level. The results resonate with the idea that urban economies provide a mix of industrial diversity and specialisation. A location in a within-city industry cluster in a diversified, large city appears to let firms enjoy the benefits of local industry-specific externalities, while reaping the general city-wide benefits of a diversified city.

Keywords: Productivity; Diversity; Specialization; Externalities; Knowledge spillovers; Attenuation; Agglomeration economies; Geocoding (search for similar items in EconPapers)
JEL-codes: D24 L23 R12 (search for similar items in EconPapers)
Pages: 28 pages
Date: 2017-05-10
New Economics Papers: this item is included in nep-geo, nep-ino, nep-sbm, nep-tid and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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