Variety, economic growth and knowledge intensity of European regions: a spatial panel analysis

Abstract

Although the theoretical framework on agglomeration externalities and the channels through which they influence the regional economy appear well established, the empirical evidence on their magnitude and impact has been rather ambiguous and inconclusive. Applying the concepts of related and unrelated variety to an interregional European dataset and using spatial panel analysis, this paper provides critical information on the type and functioning of agglomeration externalities in relation to regional heterogeneity in knowledge intensity and innovation. We demonstrate that modeling this regional heterogeneity in a spatial panel setting is a crucial condition for identifying the positive agglomeration effects of (un)related variety on regional growth. The outcomes have substantial implications for European regional policy: We argue that policies should be both conceptually enriched and more empirically informed. JEL Classification

Related variety and economic development: a literature review

“…More recently, Cortinovis and Van Oort (2015) conducted their research using a panEuropean data set. Following the original set-up of the study by Frenken et al (2007), they hypothesize that related variety is positively related to employment growth due to knowledge spillovers across sectors; unrelated variety is negatively related to unemployment growth due to portfolio effects associated with a diversified economy and as a result dampened effects of sector-specific shocks.…”

“…Those who looked at inter-industry differences found that the effects of related variety on growth may be specific to certain industries only, especially manufacturing and knowledge-intensive ones (Bishop & Gripaios, 2010;Bosma et al, 2011;Cortinovis & Van Oort, 2015;Hartog et al, 2012). Concerning the studies looking on how countries or regions develop new industries following Hidalgo et al (2007), it was also found that if a region or countries already host industries that are related to a specific industry, it is much more likely to become specialized in that industry.…”

“…Again, in so far as possible, standardization is needed. (2) Findings that suggest that related-variety effects on growth are confined to certain sectors (Bishop & Gripaios, 2010;Cortinovis & Van Oort, 2015;Hartog et al, 2012;Mameli et al, 2012) deserve further theoretical and empirical elaboration. A common thread among these studies point to the role of knowledge intensity.…”

Between Spilling Over and Boiling Down: Network-Mediated Spillovers, Absorptive Capacity and Productivity in European Regions

“…Firstly, we investigate in a spatial panel setting with region and year fixed effects whether and how network relations affect local productivity, once the spatial proximity dimension is controlled for. Secondly, we specifically model network relations with most knowledge and technologically advanced regions (Wintijes and Hollanders 2010, Cortinovis and Van Oort 2015) to study whether such linkages provide directed spillover effects. Thirdly, we test whether the stock of absorptive capabilities of regions (on an educational level) act as precondition for regions to profit (take in) from network relations with most advanced regions (Miguelez and Moreno 2015, Cortinovis andVan Oort 2015).…”

“…Secondly, we specifically model network relations with most knowledge and technologically advanced regions (Wintijes and Hollanders 2010, Cortinovis and Van Oort 2015) to study whether such linkages provide directed spillover effects. Thirdly, we test whether the stock of absorptive capabilities of regions (on an educational level) act as precondition for regions to profit (take in) from network relations with most advanced regions (Miguelez and Moreno 2015, Cortinovis andVan Oort 2015). Finally, we check the validity of our potentially endogenous results with an instrumental variable (IV) strategy, in which illiteracy rates and gross reproduction rates in European regions in the early 1930s are used as an instrument for current R&D expenditures.…”