Template-Type: ReDIF-Paper 1.0
Series: Tinbergen Institute Discussion Papers
Creation-Date: 2011-06-06
Number: 11-085/3
Author-Name: Hans Koster
Author-Email: h.koster@vu.nl
Author-Workplace-Name: VU University Amsterdam
Author-Name: Jos N. van Ommeren
Author-Email: j.n.van.ommeren@vu.nl
Author-Workplace-Name: VU University Amsterdam
Author-Name: Piet Rietveld
Author-Email: p.rietveld@vu.nl
Author-Workplace-Name: VU University Amsterdam
Title: Geographic Concentration of Business Services Firms: A Poisson Sorting Model
Abstract: This paper examines the effects of specialisation (within-sector clustering) and diversity (between-sector clustering) on business services profitability and location choice. We apply a semiparametric Poisson sorting model allowing for firm-specific effects. We find that for most firms, profitability of business services firms is substantially higher close to specialised clusters of business services firms. A standard deviation increase in business services specialisation leads to on average a 40 percent increase in the probability that a business services firm locates there, supporting theories of Marshall, Arrow and Romer. It is also profitable for most business services firms to locate near a group of firms that belong to the same sector, not necessarily business services firms, so diversity is negatively related to location decisions. Almost all firms either benefit from within-sector clustering or between-sector clustering. Within-sector clusters are particularly profitable for large mature firms, whereas between-sector clusters are relatively more profitable for smaller innovative firms.
Classification-JEL: R12, R14, R39
Keywords: Sorting; Agglomeration Economies; Specialisation; Diversity; Heterogeneity; Semiparametric Estimation
File-Url: https://papers.tinbergen.nl/11085.pdf
File-Format: application/pdf
File-Size: 799663 bytes
Handle: RePEc:tin:wpaper:20110085