On the scope of agglomeration economies: Evidence from Catalan zip codes

Abstract

This paper aims at studying the scope of agglomerations economies empirically. In particular, two issues are explored. First, the industrial scope of agglomeration economies is analysed, by comparing the effects arising from co-localization of same industry firms (localization economies) to the benefits derived from large and diversified economic environments (urbanization/Jacobs diversity effects). Second, the geographic scope of these external effects is studied. These issues are addressed by studying the effects of local industrial characteristics on the one number of births of new establishments in the subsequent period. A theoretical framework is used to interpret regression results in terms of scale effects (productivity shifters). Econometric estimations are carried out, separately, for seven industries for Catalonia, which is a Spanish region, using 1997-2000 data. Evidence of localization, urbanization and diversity effects has been found. Agglomeration economies seem to work at a very local level.