Productivity Growth and Pecuniary Knowledge Externalities: An Empirical Analysis of Agglomeration Economies in European Regions

Authors

  • Cristiano Antonelli,

    1. Laboratorio di Economia dell'Innovazione “F. Momigliano”
      Dipartimento di Economia “S. Cognetti de Martiis”
      Università di Torino
      Via Po 53
      10124 Torino, Italy
      BRICK (Bureau of Research on Innovation, Complexity and Knowledge)
      Collegio Carlo Alberto,
      Moncalieri, Torino, Italy
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  • Pier Paolo Patrucco,

    1. Laboratorio di Economia dell'Innovazione “F. Momigliano”
      Dipartimento di Economia “S. Cognetti de Martiis”
      Università di Torino
      Via Po 53
      10124 Torino, Italy
      BRICK (Bureau of Research on Innovation, Complexity and Knowledge)
      Collegio Carlo Alberto,
      Moncalieri, Torino, Italy
      pierpaolo.patrucco@unito.it
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  • Francesco Quatraro

    1. BRICK (Bureau of Research on Innovation, Complexity and Knowledge)
      Collegio Carlo Alberto,
      Moncalieri, Torino, Italy
      CNRS—GREDEG,
      University of Nice Sophia Antipolis
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abstract

The article investigates the effects of the agglomeration of technological activities on the growth in regional productivity, applying the notion of pecuniary knowledge externalities. Pecuniary knowledge externalities enable one to appreciate both the gains and losses associated with the regional concentration of knowledge-generating activities. Both are two sides of the same coin. The gains are due to the reduction in the prices of knowledge as input into its dedicated markets, while the losses stem from the reduction in the prices of knowledge as an output. This analysis allows us to contextualize the effect of geographic proximity on knowledge externalities and their impact on regional growth. Our analysis leads to the hypothesis of an inverted U-shaped relationship between the agglomeration of innovation activities and productivity growth. The empirical analysis based on a large sample of European regions from 1996 to 2003 supports the hypothesis that agglomeration yields diminishing net positive effects beyond a maximum.

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