Agglomeration economies, accessibility and the spatial choice behavior of relocating firms

Abstract

A growing body of empirical urban economic studies suggests that agglomeration and accessibility externalities are important sources of the uneven distribution of economic activities across cities and regions. At the same time, little is known about the importance of agglomeration economies for the actual location behavior of ð€„‘rms. ð€„ƒis is remarkable, since theories that underlie agglomeration economies are microeconomic in nature. In a case study of the Dutch province of South Holland, we analyze micro-level data to determine the extent to which relocation decisions are dependent on accessibility and agglomeration externalities when controlling for ð€„‘rm characteristics. ð€„ƒese externalities are measured with location attributes for both own-sector localization and urbanization economies and for proximity to transport infrastructures. ð€„ƒe results conð€„‘rm that ð€„‘rm relocation behavior is affected much more by ð€„‘rm-level attributes (size, age, and growth rate) than by agglomeration and accessibility attributes. Still, accessibility and agglomeration are signið€„‘cantly attached to ð€„‘rm relocations, though their effects vary over sectors. Own-sector and generalized external economies are more important for a ð€„‘rm’s location choices than proximity to transport infrastructure.