Knowledge spillovers and the growth of British cities

Abstract

The relative importance of intra-industry or inter-industry knowledge spillovers for the growth of cities remains an open question. Using a unique data set on the growth of 109 British cities during 1951–1991, we find evidence suggesting that the most important knowledge spillovers occur between rather than within industries, which is consistent with Jacobs (1969, 1985).

Keywords:

• city growth
• inter-industry
• intra-industry
• knowledge spillovers

JEL Classification:

• O31
• R11

Notes

¹ The term MARs was coined by Glaeser et al. (1992) who pull together the views on this type of knowledge spillover in contributions from Marshall, (1966), Arrow (1962) and Romer (1986).

² The Gini coefficient of concentration has been used widely in the urban economics literature to measure the industrial composition of cities (e.g. O'Donoghue, 2000). It takes the form:

where is the Gini index for city j in a particular year, N is the number of industrial activities, denotes the cumulated values for the percentages employed in the industries in city j after these industries have first been ranked by their location quotients and denotes the corresponding cumulated percentages for the national employment profile.

³ The major British cities/urban conurbations are Greater London, Tyneside, West Midlands, Greater Manchester, West Yorkshire, Merseyside, Glasgow and Sheffield.

⁴ Moran's coefficient (I) is given by:

where n is the number of cities, and represent the economic growth in conurbations i and j, respectively, is the average growth of all the conurbations and S indicates the number of connections in the matrix .