Papers in Evolutionary Economic Geography

January 21, 2019

# 19.06 Relatedness and the Resource Curse Is there a liability of relatedness?

Rune Dahl Fitjar and Bram Timmermans



Abstract: The literature on relatedness emphasizes the benefits of co-location with related industries, as knowledge spillovers promote innovation and regional branching. However, resource competition between industries which rely on related capabilities has not largely been considered. The resource curse literature argues that resource competition produces adverse effects for other industries when extractive industries expand. However, this literature has not considered whether this depends on the relatedness between the resource industry and these other industries. This paper brings together these two strands of literature. We examine the relationship between the oil and gas industry in Norway and its related industries during a period of rising oil prices and an expansion of the oil and gas industries. We conduct the analysis at the national scale, as well as in the most oil-specialised region of Stavanger, in order to examine how these dynamics play out at a regional, as well as national level. An analysis of the labor flow between the petroleum and related industries using a Norwegian linked employer-employee database reveals that higher wages increase the likelihood of moving from related industries into petroleum, but reduce the likelihood of moving in the opposite direction. The petroleum industry recruits the most productive workers from related industries and returns its least productive workers. Consequently, we argue that relatedness is not an even playing field: There may be losers, as well as winners, from relatedness.


September 11, 2018

# 18.34 What kind of related variety for long-term regional growth?

Filed under: 2018 — Tags: , , , , , — T.Broekel @ 5:45 am

Kadri Kuusk & Mikhail Martynovich


Abstract: We investigate the evolution of relatedness linkages between Swedish industries during five sub-periods between 1991 and 2010. Distinguishing between the stable ties (present in all sub- periods) and non-stable ties (emerging, disappearing, etc), we demonstrate that the relatedness linkages change considerably over time. Furthermore, we show that the changes in the relatedness matrix matter for the impact of related variety on regional employment growth. We argue, therefore, that the relatedness linkages have a ‘best before date’ and that the choice of what relatedness indicator to apply and how deserves more consideration than it is usually given.

July 20, 2018

# 18.30 The Principle of Relatedness

Filed under: 2018 — Tags: , , — T.Broekel @ 11:14 am

César A. Hidalgo & Pierre-Alexandre Balland & Ron Boschma & Mercedes Delgado & Maryann Feldman & Koen Frenken & Edward Glaeser & Canfei He & Dieter F. Kogler & Andrea Morrison & Frank Neffke & David Rigby & Scott Stern & Siqi Zheng & Shengjun Zhu


Abstract: The idea that skills, technology, and knowledge, are spatially concentrated, has a long academic tradition. Yet, only recently this hypothesis has been empirically formalized and corroborated at multiple spatial scales, for different economic activities, and for a diversity of institutional regimes. The new synthesis is an empirical principle describing the probability that a region enters – or exits – an economic activity as a function of the number of related activities present in that location. In this paper we summarize some of the recent empirical evidence that has generalized the principle of relatedness to a fact describing the entry and exit of products, industries, occupations, and technologies, at the national, regional, and metropolitan scales. We conclude by describing some of the policy implications and future avenues of research implied by this robust empirical principle

May 31, 2018

# 18.21 The high importance of de-industrialization and job polarization for regional diversification

Filed under: 2018 — Tags: , , — T.Broekel @ 3:08 pm

Jacob Rubæk Holm & Christian Richter Østergaard


Abstract: The process of regional diversification has received a growing interest in recent years with a focus on the role of relatedness between economic activities. The main argument is that regions diversify into economic activities closely related to their current activities. However, there are also processes working against this rather path dependent process, such as de-industrialization, job polarization, skill-biased technological change, and urbanization. The purpose of this paper is to analyse the importance of relatedness and these major processes in regional diversification with specific emphasis on the role of job polarization and de-industrialisation. The paper draws on linked employer-employee census data from Denmark 2008-2013. Results show that, while relatedness does matter for regional diversification, job polarization and deindustrialisation entail that the most related industries tend to contract. Hence, the results show that regional diversification is affected by relatedness, but its effect is overshadowed by job polarisation and de-industrialization. This effect is consistent across regions. The results show a role for policy and entrepreneurship in introducing unrelated diversification.


March 15, 2018

# 18.13 What drives the geography of jobs in the US? Unpacking relatedness

Teresa Farinha Fernandes & Pierre-Alexandre Balland & Andrea Morrison & Ron Boschma


Abstract: There is ample evidence of regions diversifying in new occupations that are related to pre- existing activities in the region. However, it is still poorly understood through which mechanisms related diversification operates. To unpack relatedness, we distinguish between three mechanisms: complementarity (interdependent tasks), similarity (sharing similar skills) and local synergy (based on pure co-location). We propose a measure for each of these relatedness dimensions and assess their impact on the evolution of the occupational structure of 389 US Metropolitan Statistical Areas (MSA) for the period 2005-2016. Our findings show that new jobs appearing in MSA’s are related to existing ones, while those more likely to disappear are more unrelated to a city’s jobs’ portfolio. We found that all three relatedness dimensions matter, but local synergy shows the largest impact on entry and exit of jobs in US cities.

January 18, 2018

# 18.07 Shooting Low or High: Do Countries Benefit from Entering Unrelated Activities?

Flávio L. Pinheiro & Aamena Alshamsi & Dominik Hartmann & Ron Boschma & César Hidalgo


It is well known that countries tend to diversify their exports by entering products that are related to their current exports. Yet this average behavior is not representative of every diversification path. In this paper, we introduce a method to identify periods when countries enter relatively more unrelated products. We analyze the economic diversification paths of 93 countries between 1970 and 2010 and find that countries enter unrelated products in only about 7.2% of all observations. Then, we show that countries enter more unrelated products when they are at an intermediate level of economic development, and when they have higher levels of human capital. Finally, we ask whether countries entering more unrelated products grow faster than those entering only related products. The data shows that countries that enter more unrelated activities experience an increase in short-term economic growth of 0.5% per annum compared to those with similar levels of income, human capital, capital stock per worker, and economic complexity.

January 11, 2018

# 18.02 Multinational enterprises, industrial relatedness and employment in European regions

Filed under: 2018 — Tags: , , , , — T.Broekel @ 11:49 am

Nicola Cortinovis and Riccardo Crescenzi and Frank van Oort


This paper looks at the link between Multinational Enterprises (MNEs) and employment in local firms in their host regions. The paper cross-fertilizes the literature on MNE spillovers with the emerging body of research on industrial relatedness. This paper empirically tests the link between industrial relatedness and MNE impacts on employment by capturing various types of horizontal and vertical similarities across industries. The focus of our study is on employment in European NUTS2 regions. The empirical analysis shows that cross-sectoral MNE spillovers among cognitively related industries are positive and significant, confirming that industrial relatedness is an important driver of employment-enhancing spillovers from MNE activities. However, positive effects of MNEs on domestic employment are contingent upon the modeling of both regional and industrial heterogeneity.

November 22, 2017

# 17.28 Local and Non-Local Knowledge Typologies: Technological Complexity in the Irish Knowledge Space

Adam Whittle


It is now commonplace to assume that the production of economically valuable knowledge is central to modern theories of growth and regional development. At the same time, it is also well known that not all knowledge is equal, and that the spatial and temporal distribution of knowledge is highly uneven. Combing insights from Evolutionary Economic Geography (EEG) and Economic Complexity (EC) the primary aim of this paper is to investigate whether more complex knowledge is generated by local of non-local (foreign) firms. From this perspective, a series of recent contributions have highlighted the role of foreign firms in enacting structural transformation, but such an investigation has yet to account for the complexity of the knowledge produced. Exploiting information contained within a recently developed Irish patent database our measure of complexity uses a modified bipartite network to link the technologies produced within regions, to their country of origin i.e. local or non-local. Results indicate that the most complex technologies tend to be produced in a few diverse regions. For Ireland, our results indicate that the most complex technologies tend to be produced in a few diverse regions. In addition, we find that the majority of this complex knowledge is generated in technology classes where the share of foreign activity is greater than local firms. Lastly, we generate an entry model to compute the process of complex regional diversification. Here the focus is on how regions develop a comparative advantage in a technological domains more complex than those already present in that region. As such, we focus our attention only on those technologies with the highest complexity values, as these technologies are said to underpin the European Union’s Smart Specialisation thesis.

June 16, 2017

# 17.14 Promoting regional growth and innovation: relatedness, revealed comparative advantage and the product space

Filed under: 2017 — Tags: , , , — mattehartog @ 6:43 pm

Gloria Cicerone, Philip McCann, Viktor A. Venhorst


We adapt the product-space methodological approach of Hausmann and Klinger to the case of Italian provinces and regions in order to examine the extent to which the network connectedness and centrality of a province’s exports is related to its economic performance. We construct a new Product Space Position (PSP) index which retains many of the Hausmann-Klinger features but which is also much better suited to handling regional and provincial data. We also compare PSP performance with two other export composition indices. A better positioning in the export-network product space is indeed associated with a better local economic outcomes.

June 1, 2017

# 17.10 Local Discoveries and Technological Relatedness: the Role of Foreign Firms

Filed under: 2017 — Tags: , , , , — mattehartog @ 5:07 pm

Alessia Lo Turco and Daniela Maggioni


We explore the role of local intra and extra-regional product-specific capabilities in foster ing the introduction of new products by firms active in the Turkish manufacturing sector. We model firms’ product additions to their product basket as dependent on extra and intra-regional knowledge. We find that regional “discoveries”, that is newly introduced products never produced before in the region, are positively and significantly affected by external related knowledge spurring from foreign firms active in the same location as well as by firm internal capabilities. Technologically related intra-regional knowledge spillovers and extra-regional knowledge spilling from imported inputs do not play a relevant role. The former, however, matter when we extend the analysis to all new products introduced by firms, regardless of their previous presence in the regional production basket. We interpret this evidence as foreign affiliates bringing new and exclusive capabilities which are missing in the region where they locate, thus providing a stimulus for regional production diversification and upgrading. This hypothesis is validated by exploring the heterogeneous role of the different intra and extra-regional knowledge sources according to products’ complexity.

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