Analysing spatial concentration of Hungarian knowledge intensive manufacturing sectors on city-region level 1996-2012

It seems to be widely accepted that regional development extensively depends on two types of agglomeration economies. On the first hand there are urbanization economies, namely regions with diverse economic environment, these provide firms with opportunities to grow and improve their technologies. On the second hand there are localization economies, which mean regions gaining from specialization because firms enjoy presence of suppliers, specialized labor and knowledge spillover among co-located partners. This is especially important in case of knowledge intensive industries. Knowledge-intensive industries have attracted a great attention nowadays in researches because of its contribution to the development of knowledge driven economy. They generate positive effects on the regional economy and have increasingly high importance in less developed regions, like Hungary. The identification of spatial distribution, the geographical co-location of knowledge-intensive economic activities is substantial to define potential leading industrial branches in regions. Our argument is closely connected to the recent emphasis of European Union on smart specialization. Several different methods can be found in the literature measuring the specialization of regions and the concentration of industries. These two phenomena build two scopes of localization economies, the geographical and the sectorial ones. Our paper addresses the spatial distribution of Hungarian manufacturing industries computing raw concentration index EG G and spatial concentration index EG ?? proposed by Ellison and Glaeser (1994) as measures of internal and external economies of scale. Computations are based on the number of employees for a 17 years period covering early stage of Hungarian transition economy, the EU access and the economic crisis (1996-2012). Our investigation is based on two different types of territorial units: city-regions and subregions (LAU 1 level. In order to apply regional development strategies in regions, one has to consider nodal regions, i.e. functional regions established from labour commuting zones with a powerful centre: the 23 city-regions. Labour commuting zones often extend beyond the borders of subregions (175), but latter are still well applicable for investigation of concentration. Based on our calculations we compared 1. measured spatial concentration of knowledge intensive industries and that of non-knowledge intensive ones. 2. measured spatial concentration based on city regions and subregions. 3. measured spatial concentration of NACE 2-digits and NACE 4digits industries by computation of co-agglomeration index (EG ??) We also investigated change of employment, firms and average firm size of industries over time. Our preliminary results indicate emphasized geographical concentration of knowledge intensive industries compared to non-knowledge intensive ones. The vast majority of cases, this concentration arises from the external economies of scale and it is even more present in case of city-regions than in case of subregions.