Working Paper: CEPR ID: DP1980
Authors: Maryann P. Feldman; David B. Audretsch
Abstract: Whether diversity or specialization of economic activity better promotes technological change and subsequent economic growth has been the subject of a heated debate in the economics literature. The purpose of this paper is to consider the effect of the composition of economic activity on innovation. We test whether the specialization of economic activity within a narrow concentrated set of economic activities is more conducive to knowledge spillovers or if diversity, by bringing together complementary activities, better promotes innovation. The evidence provides considerable support for the diversity thesis but little support for the specialization thesis.
Keywords: innovation; geography; economic development; agglomeration; spillovers; growth
JEL Codes: O1; O3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| economic activity composition (diversity vs. specialization) (R12) | innovative output (O36) |
| specialization in a narrow set of economic activities (Z19) | innovative output (O36) |
| presence of science-based related industries (L65) | innovative output (O36) |
| localized competition (R32) | innovative output (O36) |