Complexities in the spatial scope of agglomeration economies

This paper argues that the spatial scope of agglomeration economies is more complex than is often assumed in the literature. We provide insight into this issue by showing that agglomeration on short distances (<5 km) does not significantly affect wages, whereas it has a significant and positive e...

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Bibliographic Details
Published inJournal of regional science Vol. 59; no. 1; pp. 29 - 55
Main Authors Verstraten, Paul, Verweij, Gerard, Zwaneveld, Peter J.
Format Journal Article
LanguageEnglish
Published Heightstown Blackwell Publishers Inc 01.01.2019
Subjects
Agglomeration
agglomeration economies
Borders
Decay
Economic models
Longitudinal studies
panel data analysis
spatial wage disparities
wages
Wages & salaries
Netherlands
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Summary:This paper argues that the spatial scope of agglomeration economies is more complex than is often assumed in the literature. We provide insight into this issue by showing that agglomeration on short distances (<5 km) does not significantly affect wages, whereas it has a significant and positive effect on medium distances (5–10 km). This effect attenuates rapidly across geographic space, becoming insignificant after 40–80 km. We offer several explanations for this observed distance decay pattern. The results do not imply, however, that nearby agglomeration is irrelevant to the wage formation: only highly urbanized areas benefit from agglomeration on longer distances. Furthermore, this article finds no evidence that foreign economic mass affects wages in the Netherlands, which suggests that national borders are still a substantial barrier for economic interaction.
Bibliography:Funding information
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This research did not receive any specific grant from funding agencies in the public, commercial, or not‐for‐profit sector.
ISSN:0022-4146
1467-9787
DOI:10.1111/jors.12391