A dynamic approach to the tendency of industries to cluster

provided by Research Papers in Economics

Co-location of manufacturing &
producer services - a simultaneous
equations approach

by

Martin Andersson^ψ

[email protected]

Abstract

This paper investigates the tendencies of co-location between the producer service
sector and the manufacturing sector across Swedish functional regions. The
employment in these sectors is modeled as being determined simultaneously, i.e.
the location of the producer service sector is a function of the location of the
manufacturing sector and vice versa. The rationale for the simultaneous approach
comes from an assumption of an input-output schedule between the two sectors.
Accessibility based on time distances is incorporated into the analysis to allow for
inter-regional effects. The findings in this paper suggest that self-organized cluster
formations of advanced manufacturing and knowledge intensive producer services
can only be expected in urban regions. One important policy implication of the
results is that a policy directed towards establishing a cluster of advanced
manufacturing and knowledge intensive producer services in a non-urban region
should focus on attracting the latter type of industries. The reason is that the
results in this paper imply that advanced manufacturing respond to accessibility to
knowledge intensive producer service industries while the opposite effect is not
present in non-urban regions.

JEL classification: R12, L60, L80

Keywords: co-location, manufacturing, producer services, accessibility

^ψ Jonkoping International Business School, P.O box 1026, SE-551 11 Jonkoping

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