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Estimation of semiparametric sorting models: Explaining geographical concentration of business services

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  • Koster, Hans R.A.
  • van Ommeren, Jos
  • Rietveld, Piet

Abstract

We introduce a sorting model for firms where firm-specific profit coefficients can be identified given information on location choices of firms. It is shown that one may estimate such a model using a semiparametric Poisson approach. We apply this approach by examining the effects of specialization and diversity at the local level on profitability of business services firms. We find that, for most firms, profitability increases with specialization and decreases with diversity. In line with the literature, it is shown that specialization is particularly profitable for large and older firms, whereas diversity is relatively more profitable for smaller and younger firms.

Suggested Citation

  • Koster, Hans R.A. & van Ommeren, Jos & Rietveld, Piet, 2014. "Estimation of semiparametric sorting models: Explaining geographical concentration of business services," Regional Science and Urban Economics, Elsevier, vol. 44(C), pages 14-28.
    • Handle: RePEc:eee:regeco:v:44:y:2014:i:c:p:14-28
    DOI: 10.1016/j.regsciurbeco.2013.10.001
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    More about this item

    Keywords

    Sorting; Agglomeration economies; Specialization; Diversity; Heterogeneity; Semiparametric estimation;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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