The Positive Link Between Geographical Agglomeration and Export Intensity: The Engine of Italian Endogenous Growth?

Abstract

The theoretical part of the paper presents a stylised model where geographical proximity is assumed to increase private firm benefits from generating export services. On these premises the model shows that export intensity is higher for firms agglomerated in “industrial districts” than for isolated firms. It also shows how this positive relationship between export intensity and geographical agglomeration may be univocally established only when competition on foreign markets among firms cooperating in export services is not too high. The validity of this conclusion is analysed under different frameworks such as infinitely repeated noncooperative and cooperative games. The empirical part of the paper provides partial support to this theoretical hypothesis showing that benefits from geographical agglomeration in terms of higher export intensity and higher export participation are decreasing in firm size and generally higher in sectors characterised by forms of competition based on horizontal product differentiation.