Abstract
What drives the relation between market-size and employment? There is a relationship between the size of an agglomeration and its diversity; in terms of number of sectors present and in terms of number of firms within each sector. There is also a relationship between the size of different agglomerations and the average size of firms located in them. Total employment in a region may be expressed as the product of number of sectors, number of firms in each sector and average firm size in each sector.
In the literature it is emphasized that diversity may be important for aggregate productivity and growth. The scale of operations in individual firms may also be important for productivity. Thus, the productivity in a region depends on both external and internal economies of scale. Looking at the relationship between regional size and employment it is possible to reveal the relative importance of each of the three factors.
The applied technique allows us to untangle the overall elasticity of employment with respect to market-size and estimate the contribution of each component to the overall elasticity. Using data on Swedish regions over the time period 1990–2004 we show that there are marked differences between manufacturing and service sectors in terms of the contribution of the different components to the overall elasticity. The contribution of the respective component is also different for regional and extra-regional market-size.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Notes
- 1.
A major contribution of NEG models is their ability to explain spatial agglomeration as a self-reinforcing process involving backward and forward linkages (Krugman 1991): scale economies in production and trade costs make it advantageous to locate in locations with high access to suppliers (forward linkage) and large market-size (backward linkage). Access to markets and suppliers is highest in those locations where producers have already concentrated.
- 2.
This originates from the special property of CES functions, and does not hold in models with variable substitution of elasticity.
- 3.
A significant share of the remaining Swedish employment is found in the public sector.
- 4.
As shown by Weibull (1976 and 1980) accessibility measures based in exponential distance-decay functions satisfy criteria of consistency and meaningfulness.
References
Alonso W (1964) Location and land use. Harvard University Press, Cambridge, MA
Andersson Gråsjö (2008) Andersson M and Gråsjö U (2008) Spatial dependence and the representation of space. Annal Reg Sci (forthcoming)
Baldwin RE, Okubo T (2006) Heterogeneous firms, agglomeration and economic geography: spatial selection and sorting. J Econ Geogr 6:323–346
Chinitz B (1961) Contrasts in agglomeration: New York and Pittsburgh. Am Econ Rev 51:279–289
Christaller W (1933) Die Zentralen Orte in Süddeutschland. Prentice-Hall, Englewood Cliffs. Baskin CW (1966) Central places in southern Germany (trans: Baskin CW)
Either WJ (1982) National and international returns to scale in the modern theory of international trade. Am Econ Rev 72(3):389–405
Fujita M, Thisse J-F (2002) Economics of agglomeration. Cities, industrial location, and regional growth. Cambridge University Press, Cambridge, UK
Fujita M, Krugman P, Venables AJ (1999) The spatial economy: cities, regions and international trade. MIT Press, Cambridge, MA
Hirschman A (1958) The strategy of economic development. Yale University Press, New Haven
Johansson B, Klaesson J, Olsson M (2003) Commuters’ non-linear response to time distances. J Geogr Syst 5(3):315–329
Krugman P (1991) Geography and trade. MIT Press, Cambridge, MA
Lösch A (1954) The economics of location. Yale University Press, New Haven
Marshall A (1920) Principles of economics. Macmillan, London
Matsuyama K (1995) Complementarities and cumulative processes in models of monopolistic competition. J Econ Lit 33:701–729
Moses L (1958) Location and the theory of production. Q J Econ 78:259–272
Ohlin B (1933) Interregional and international trade. Harvard University Press, Cambridge, MA
Palander T (1935) Beiträge zur Standortstheorie. Almqvist and Wicksell, Uppsala
Rey S, Montouri BD (1999) U.S. regional income convergence: a spatial econometric perspective. Reg Stud 33:143–156
von Thunen JH (1826) Der isolierte Staat in Beziehung auf Landwirtschaft und Nationaloekonomie, Hamburg
Weber A (1909) Uber den Standort der Industrien. Friedrich CJ (1929) Alfred Weber’s theory of the location of industries (trans: Friedrich CJ). University of Chicago Press, Chicago
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2013 Springer-Verlag Berlin Heidelberg
About this chapter
Cite this chapter
Andersson, M., Klaesson, J. (2013). Market-Size and Employment. In: Klaesson, J., Johansson, B., Karlsson, C. (eds) Metropolitan Regions. Advances in Spatial Science. Springer, Berlin, Heidelberg. https://doi.org/10.1007/978-3-642-32141-2_11
Download citation
DOI: https://doi.org/10.1007/978-3-642-32141-2_11
Published:
Publisher Name: Springer, Berlin, Heidelberg
Print ISBN: 978-3-642-32140-5
Online ISBN: 978-3-642-32141-2
eBook Packages: Business and EconomicsEconomics and Finance (R0)