Variety and regional economic growth in the Netherlands

Koen Frenken (), Frank van Oort (), Thijs Verburg and Ron Boschma

No 502, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Section of Economic Geography

Abstract: In economic theory, one can distinguish between variety as a source of regional knowledge spillovers, called Jacobs externalities, and variety as a portfolio protecting a region from external shocks. We argue that Jacobs externalities are best measured by related variety (within sectors), while the portfolio argument is better captured by unrelated variety (between sectors). We introduce a methodology based on entropy measures to compute related variety and unrelated variety. Using data at the COROP level for the period 1996-2002, we find that Jacobs externalities enhance employment growth, while unrelated variety dampens unemployment growth. Productivity growth, by contrast, can be explained by traditional determinants including investments and R&D expenditures. Implications for regional policy in The Netherlands follow.

Keywords: evolutionary economic geography; new economic geography; economic variety (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo, nep-ino and nep-ure
Date: 2004-12, Revised 2004-12
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