Working Paper: CEPR ID: DP2467
Authors: Karen Helene Midelfart Knarvik; Frode Steen
Abstract: In this paper we analyse vertical industry linkages, and the extent to which these work as channels for externalities. First, we test for activity-based externalities stemming from output growth and output level in vertically linked industries. Second, we aim at revealing the importance of a large home market for upstream industries. Eventually, by comparing results on localized inter-industry externalities and on the impact of local sales, we try to identify to what extent the geographical agglomeration of an industry is self-reinforcing. A number of Norwegian maritime transport and services sectors are analysed. The results are promising in the sense that the model distinguishes empirically between different sources of externalities, and unveils which vertical linkages that give rise to endogenous agglomeration.
Keywords: external economies of scale; industrial agglomeration; productivity growth
JEL Codes: C20; L80; O40; R10
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| output growth in vertically linked industries (O49) | downstream productivity growth (O49) |
| local upstream activity levels (R11) | downstream productivity growth (O49) |
| maritime transport sector performance (L92) | size and activity levels of local upstream industries (R11) |
| activity growth of localized vertically linked industries (O49) | output growth in one industry (O40) |
| size and activity levels of local upstream industries (R11) | maritime transport sector performance (L92) |