Working Paper: CEPR ID: DP2896
Authors: Espen Henriksen; Karen Helene Midelfart Knarvik; Frode Steen
Abstract: We test for internal and external economies of scale in European manufacturing, employing a more disaggregated data set than has been used in earlier analyses. We aim to separate externalities from common business cycle effects. Fifteen European manufacturing industries in Germany, France, the UK and Italy are analysed. We focus on economies of scale at three levels: the national industry, the national industrial cluster and the transnational industry. Our results suggest that external economies of scale arising from inter-industry external effects and cross-country effects are less prevalent than increasing returns at the level of the industry and firm. Our results underscore the importance of the level of disaggregation in studies of internal and external economies of scale and argue that the external effects are highly country and industry specific.
Keywords: clusters; internal and external economies of scale; new economic geography
JEL Codes: C33; D24; O47; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| internal economies of scale (F12) | external economies of scale (R12) |
| domestic interindustry externalities (D62) | international intraindustry externalities (F69) |
| internal economies of scale (F12) | significance of external economies of scale (F12) |
| German manufacturing (N64) | significant interindustry externalities (D62) |
| German manufacturing (N64) | international intraindustry spillovers (F29) |
| internal economies of scale (F12) | increasing returns to scale in textile and leather industries (L67) |
| internal economies of scale (F12) | increasing returns to scale in transport industries (L92) |