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.

Regional diversity and economic performance

This thesis consists of an introductory chapter and four individual papers. In each paper the relationship between some form of spatial diversity and economic performance is analyzed. Diversity is treated as a potential source of externality effects, mainly in the form of knowledge spillovers. The first paper studies the impact of a broad range of spatial externalities on the productivity of manufacturing plants. While finding positive effects of specialization and competition, there is no support for positive spillovers of either related or unrelated industry diversity. The second paper argues that relatedness should be framed at the level of individuals and consequently should be measured in terms of, for example, education and occupation rather than industry belonging. The results show that educational- and occupational related diversity matter for regional productivity growth, while related industry diversity is positively related to employment growth. The third paper analyzes the importance of neighborhood related diversity, in terms of both industries and education, and internal human capital for firms’ propensity to innovate. The findings support that education and skills are strongly related to firm innovation. Additionally, firms in metropolitan regions are more innovative in neighborhoods with more related diversity in industries, while firms in rural regions seem to benefit more from related diversity in education. In the fourth paper, the location factor of interest is segregation, which may be regarded as inverse diversity. The results show that neighborhood segregation has a negative effect on individual employment. However, it is not the spatial separation of individuals with different backgrounds that causes lower employment but rather the distress of segregated neighborhoods.