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Relatedness, Complexity and Local Growth

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  • Benjamin Davies

    (Motu Economic and Public Policy Research)

  • David C Maré

    (Motu Economic and Public Policy Research)

Abstract

We derive a measure of the relatedness between economic activities based on weighted correlations of local employment shares, and use this measure to estimate city and activity complexity. Our approach extends discrete measures used in previous studies by recognising the extent of activities' local over-representation and by adjusting for differences in signal quality between geographic areas with different sizes. We examine the contribution of relatedness and complexity to urban employment growth, using 1981–2013 census data from New Zealand. Complex activities experienced faster employment growth during our period of study, especially in complex cities. However, this growth was not significantly stronger in cities more dense with related activities. Relatedness and complexity appear to be most relevant for analysing how large, complex cities grow, and are less informative for understanding employment dynamics in small, less complex cities.

Suggested Citation

  • Benjamin Davies & David C Maré, 2019. "Relatedness, Complexity and Local Growth," Working Papers 19_01, Motu Economic and Public Policy Research.
    • Handle: RePEc:mtu:wpaper:19_01
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    Cited by:

    1. Balland, Pierre-Alexandre & Boschma, Ron, 2022. "Do scientific capabilities in specific domains matter for technological diversification in European regions?," Research Policy, Elsevier, vol. 51(10).
    2. Focacci, Chiara Natalie & Kovac, Mitja & Spruk, Rok, 2023. "Ethnolinguistic diversity, quality of local public institutions, and firm-level innovation," International Review of Law and Economics, Elsevier, vol. 75(C).
    3. Mariane Santos Françoso & Ron Boschma & Nicholas Vonortas, 2024. "Regional diversification in Brazil: The role of relatedness and complexity," Growth and Change, Wiley Blackwell, vol. 55(1), March.
    4. Julia Bachtrögler-Unger & Pierre-Alexandre Balland & Ron Boschma & Thomas Schwab, 2023. "Technological Capabilities and the Twin Transition in Europe. Opportunities for Regional Collaboration and Economic Cohesion," WIFO Studies, WIFO, number 70743.
    5. Tolulope Paul Akinbobola & Oluwole Matthew Akinnagbe, 2023. "Determinants of linkages between agricultural institutions and agro-allied industries in Southwest, Nigeria," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 25(1), pages 228-248, January.
    6. Ron Boschma, 2022. "Evolutionary Economic Geography and Policy," Papers in Evolutionary Economic Geography (PEEG) 2220, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Oct 2022.
    7. Barbara MARTINI & Marco PLATANIA, 2022. "Are The Regions With More Gender Equality The More Resilient Ones? An Analysis Of The Italian Regions," Regional Science Inquiry, Hellenic Association of Regional Scientists, vol. 0(2), pages 71-94, June.
    8. Joanna Kudelko & Katarzyna Zmija & Dariusz Zmija, 2022. "Regional smart specialisations in the light of dynamic changes in the employment structure: the case of a region in Poland," Equilibrium. Quarterly Journal of Economics and Economic Policy, Institute of Economic Research, vol. 17(1), pages 133-171, March.
    9. Tom Broekel & Rune Dahl Fitjar & Silje Haus-Reve, 2021. "The roles of diversity, complexity, and relatedness in regional development – What does the occupational perspective add?," Papers in Evolutionary Economic Geography (PEEG) 2135, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Nov 2021.
    10. Koen Frenken & Frank Neffke & Alje van Dam, 2023. "Capabilities, institutions and regional economic development: a proposed synthesis," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 16(3), pages 405-416.
    11. Jason Deegan & Tom Broekel & Silje Haus-Reve & Rune Dahl Fitjar, 2024. "How regions diversify into new jobs: From related industries or related occupations?," Papers in Evolutionary Economic Geography (PEEG) 2409, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Apr 2024.
    12. F. Colozza & R. Boschma & A. Morrison & C. Pietrobelli, 2021. "The importance of global value chains and regional capabilities for the economic complexity of EU-regions," Papers in Evolutionary Economic Geography (PEEG) 2139, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Dec 2021.
    13. Nicola Cortinovis & Dongmiao Zhang & Ron Boschma, 2022. "Regional diversification and intra-regional wage inequality in the Netherlands," Papers in Evolutionary Economic Geography (PEEG) 2216, Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography, revised Aug 2022.
    14. Zoltán Elekes & Anna Baranowska-Rataj & Rikard Eriksson, 2023. "Regional diversification and labour market upgrading: local access to skill-related high-income jobs helps workers escaping low-wage employment," Cambridge Journal of Regions, Economy and Society, Cambridge Political Economy Society, vol. 16(3), pages 417-430.
    15. Wang, Feng & Wu, Min & Wang, Jingcao, 2023. "Can increasing economic complexity improve China's green development efficiency?," Energy Economics, Elsevier, vol. 117(C).
    16. Fritz, Benedikt & Manduca, Robert, 2021. "The Economic Complexity of US Metropolitan Areas," SocArXiv 2gw9c, Center for Open Science.
    17. Ashraf, Sania & P., Jithin & Slim, Skander & Najeeb, Roshen, 2023. "Global value chains and economic complexity index: Evidence from generalized panel quantile regression," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 347-365.
    18. Zoltán Elekes & Rikard Eriksson & Anna Baranowska-Rataj, 2023. "Regional diversification and labour market upgrading: Local access to skill-related high-income jobs helps workers escaping low-wage employment," CERS-IE WORKING PAPERS 2315, Institute of Economics, Centre for Economic and Regional Studies.

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    More about this item

    Keywords

    Relatedness; Complexity; Smart Specialisation;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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