The impact of spatial externalities : Skills, education and plant productivity

This paper analyses the role of a broad range of spatial externalities in explaining average labour productivity of Swedish manufacturing plants. The main findings show positive effects from general urbanization economies and labour market matching, as well as a negative effect from within-industry diversity. These results confirm previous research despite methodological differences,which implies wider generalizability. Additionally, the empirical findings support Marshall–Arrow–Romer (MAR) and Porter externalities, i.e. positive effects from specialization and competition. No evidence is found of Jacobs externalities, neither when measured as between-industry diversity nor as within-industry diversity. Finally, plant-specific characteristics play a key role in explaining plant-level productivity.