A dynamic approach to the tendency of industries to cluster

employment in the producer service sector and the accessibility to manufacturing is
stronger in urban than in non-urban regions. Such type of disproportionality indicates that
both sectors flourish in the presence of urbanization economies. Another interesting result
is that non-urban regions’ accessib ility to producer services has an effect on the
manufacturing employment in those regions, while the opposite effect cannot be
confirmed. The accessibility to manufacturing does not add nor subtracts anything to the
employment in producer services in non-urban regions. The lower goodness of fit (adj.
R²) for the producer services compared to manufacturing, indicates that this might be due
to that the employment in producer services in these regions are there because of factors
not accounted for in the model.

In order to investigate if there are structural differences at a more disaggregated level,
a distinction is made between knowledge intensive and non-knowledge intensive
producer service industries within the sector¹⁷. Also, knowledge intensive (advanced)
manufacturing industries are distinguished from non-knowledge intensive (traditional)
manufacturing industries within the manufacturing sector. Here, it is hypothesized that
advanced manufacturing, such as Manufacture of industrial process and control
equipment and Manufacture of computers and other information processing equipment, is
essentially more dependent upon knowledge intensive producer service industries such as
Technical testing and analysis and R&D on engineering and technology than on non-
knowledge intensive producer service industries and vice versa. Thus, it is assumed that
the input coefficients between knowledge intensive producer service and manufacturing
sectors on the one hand, and between non-knowledge intensive producer service and
manufacturing industries on the other are significantly larger relative to each other.

Producer services (PS)

Figure 4.1. Division of producer services and manufacturing.

How the division described above was performed is illustrated in Figure 4.1. The
classification of knowledge intensive industries vs. non-knowledge intensive industries
was constructed relative to the own sector¹⁸. Therefore, the cut-values are different
between the two sectors, as can be seen in the figure. Since the producer service sector is
in general more knowledge intensive than the manufacturing sector, knowledge intensive

¹⁷ The right column in the table in Appendix B indicates which industries within the producer service sector that
are knowledge intensive.

¹⁸ The knowledge intensity is defined as the total number of employed with a university education of 3 years or
longer divided by the total employment in the industry.

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