Mapping Sectoral Patterns of Technological Accumulation into the Geography of Corporate Locations. A Simple Model and Some Promising Evidence

Economies of agglomeration are central to the understanding of the emergence of industrial clustering. However, existing models that incorporate such agglomeration economies have been largely neglecting the vast amount of empirical evidence on inter-sectoral differences in the patterns of industrial concentration. In this paper, we propose a baseline model of firm location in presence of dynamic increasing returns. The model is able to deliver testable implications about the long-run distribution of the size of spatial clusters which we test against data on geographical location of Italian firms belonging to different sectors. We show that accordance of theoretical predictions with data is quite high. Moreover, we find statistically significant differences in the strength of economies of agglomeration, not only across geographical locations but also across industrial sectors. We argue that geographical clustering is highly affected by intersectoral differences in innovation patterns and learning regimes that map into different drivers of sectorand location-specific dynamic increasing returns to agglomeration.