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Non-linear externalities in firm localization

Author

Listed:
  • Giulio Bottazzi

    (Institute of Economics of Sant'Anna [Pisa] - SSSUP - Scuola Universitaria Superiore Sant'Anna = Sant'Anna School of Advanced Studies [Pisa])

  • Ugo Gragnolati

    (CES - Centre d'économie de la Sorbonne - UP1 - Université Paris 1 Panthéon-Sorbonne - CNRS - Centre National de la Recherche Scientifique)

  • Fabio Vanni

    (Institute of Economics of Sant'Anna [Pisa] - SSSUP - Scuola Universitaria Superiore Sant'Anna = Sant'Anna School of Advanced Studies [Pisa])

Abstract

This paper presents a model of firm localization in which the intrinsic advantages of regions are disentangled from localized externalities, while this latter force is allowed to have a quadratic shape. We verify through inferential analysis whether the quadratic component of localized externalities is statistically different from zero. Such term can reflect more-than-linear positive feedbacks as well as congestion effects, so that the sign of the interdependencies stemming from localization is not assumed a priori to be positive. Our main result is that the quadratic term is virtually never statistically different from zero across Italian sectors observed at the scale of commuting zones, so that localized externalities seem to be well approximated by a linear specification. JEL codes: C12, C16, C51, R30.

Suggested Citation

  • Giulio Bottazzi & Ugo Gragnolati & Fabio Vanni, 2017. "Non-linear externalities in firm localization," Post-Print hal-01405780, HAL.
    • Handle: RePEc:hal:journl:hal-01405780
    DOI: 10.1080/00343404.2016.1237770
    Note: View the original document on HAL open archive server: https://paris1.hal.science/hal-01405780
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    More about this item

    Keywords

    Firm localization; Externalities; Non-linearities;
    All these keywords.

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C16 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Econometric and Statistical Methods; Specific Distributions
    • C51 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Model Construction and Estimation
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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