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Spatial Agglomeration and Superstar Firms: Firm-Level Patterns From Europe and U.S

Laura Alfaro (), Maggie Chen () and Harald Fadinger

CRC TR 224 Discussion Paper Series from University of Bonn and University of Mannheim, Germany

Abstract: We characterize the agglomeration patterns of industries and plants in Europe, distinguishing Eurozone countries and the U.S. Using a micro-level index, we quantify the degree of geographic concentration in industrial activities and explore how firm heterogeneity, industry attributes, and location fundamentals jointly explain the observed patterns. Our analysis shows that there is a clear hub-and-spoke structure in the geographic distribution. Larger and more productive plants, especially the superstars of each industry, are more centred than their smaller, less productive counterparts. The greater agglomeration surrounding superstars is particularly pronounced in the Eurozone but not present in the rest of Europe. Location fundamentals also play an important role and can sometimes mitigate the importance of agglomeration economies around large firms. Regions with different levels of economic development, including in education and technology, exhibit distinct agglomeration patterns. The findings suggest heterogeneity in the ability of regional policies to build superstar-centred industry clusters.

Pages: 47
Date: 2019-08
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