Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87529
Authors: 
Koster, Hans
van Ommeren, Jos N.
Rietveld, Piet
Year of Publication: 
2011
Series/Report no.: 
Tinbergen Institute Discussion Paper 11-085/3
Abstract: 
This paper examines the effects of specialisation (within-sector clustering) and diversity (between-sector clustering) on business services profitability and location choice. We apply a semiparametric Poisson sorting model allowing for firm-specific effects. We find that for most firms, profitability of business services firms is substantially higher close to specialised clusters of business services firms. A standard deviation increase in business services specialisation leads to on average a 40 percent increase in the probability that a business services firm locates there, supporting theories of Marshall, Arrow and Romer. It is also profitable for most business services firms to locate near a group of firms that belong to the same sector, not necessarily business services firms, so diversity is negatively related to location decisions. Almost all firms either benefit from within-sector clustering or between-sector clustering. Within-sector clusters are particularly profitable for large mature firms, whereas between-sector clusters are relatively more profitable for smaller innovative firms.
Subjects: 
Sorting
Agglomeration Economies
Specialisation
Diversity
Heterogeneity
Semiparametric Estimation
JEL: 
R12
R14
R39
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

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