DP2467 Vertical Industry Linkages: Sources Of Productivity Gains And Cumulative Causation

Author(s): Frode Steen, Karen-Helene Ulltveit-Moe
Publication Date: May 2000
Keyword(s): External Economies Of Scale, industrial agglomeration, Productivity Growth
JEL(s): L80, O40, R10
Programme Areas: International Trade and Regional Economics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=2467

In this paper we analyse vertical industry linkages, and the extent to which these work as channels for externalities. First, we test for activity-based externalities stemming from output growth and output level in vertically linked industries. Second, we aim at revealing the importance of a large home market for upstream industries. Eventually, by comparing results on localized inter-industry externalities and on the impact of local sales, we try to identify to what extent the geographical agglomeration of an industry is self-reinforcing. A number of Norwegian maritime transport and services sectors are analysed. The results are promising in the sense that the model distinguishes empirically between different sources of externalities, and unveils which vertical linkages that give rise to endogenous agglomeration.