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The empirics of agglomeration economies: the link with productivity

Ana Gouveia (), Silvia Santos and Marli Fernandes
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Ana Gouveia: GPEARI - Research and Economic Policy Division

No 67, GEE Papers from Gabinete de Estratégia e Estudos, Ministério da Economia

Abstract: There is a large branch of literature providing empirical evidence on the positive effects of agglomeration economies on productivity. However, for policy makers it is important to understand the role of agglomeration economies at a more micro level, disentangling the effects across industries, firm-level characteristics and time. The present survey reviews this literature, outlining the econometric approaches and methodological challenges. In general, results show that the magnitude of agglomeration economies differ substantially across industries and point to the presence of non-linear effects, also depending on the industry and product life cycles. The channels through which these effects operate may also differ – resulting from specialization externalities (within industries in the same region) and/or urbanisation externalities (across industries in the same region). Overall, the evidence reviewed in this survey highlights the need for policy makers to follow tailor-made approaches and to complement existing evidence with national level studies, maximizing potential productivity gains.

Keywords: Agglomeration economies; Specialization externalities; Urbanization externalities; Productivity (search for similar items in EconPapers)
JEL-codes: R1 O3 L6 D24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-eff, nep-geo, nep-sbm and nep-ure
Date: 2017-02, Revised 2017-02
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