1. 1 Localised conditions for economic growth --Testing the endogenous growth hypothesis Wenjuan Li, Einar Holm, Urban Lindgren Department of Social and Economic Geography, Umeå University, SE-901 87 Umeå Sweden

2. 2 Background of the research project: PhD thesis: Firms and People in Place— Driving forces for regional growth Regional growth  employment  labour market –Labour market—labour demand and labour supply labour demand — workplace

3. 3 Literatures related to regional growth (1): Neoclassical growth models: –assuming decreasing marginal returns to scale predict a convergence of economies in regions and countries which does not seem to have been the case when comparing growth rates in developing and developed countries during the last 50 years. –neoclassical models do not explain why technological shifts occur.

4. 4 Literatures related to regional growth (2): New growth Models: –Endogenously closed economic systems (e.g. a region or a country) can become self-sustaining and experience dynamically increasing returns (Arrow, 1994; Arthur, 1994; Karlsson et al, 2001) –The increasing returns are achieved by externalities of knowledge and learning (Arrow, 1962) and of human capital (Romer, 1986 and 1990; Lucas, 1988). –The externalities are often referred to as agglomeration economies that can be further divided into MAR (Marshall-Arrow-Romer) externalities related to specialisation (localisation economies) and Jacobs externalities (Jacobs, 1969) associated with the diversity of local employment (urbanization economies).

5. 5 Inconsistent findings from empirical studies: Glaeser et al (1992) studied 170 US standard metropolitan areas and found that diversity (Jacobs externalities) contributes more to growth than other externalities Henderson et al (1995) used similar data and studied 224 US cities, reported that new industries prosper in large diverse metropolitan areas while mature industries decentralize to smaller, more specialized cities. Thus increasing returns are brought by both MAR externalities and Jacobs externalities. Wictorin (2007) studied three main industries in Swedish LA regions, reported that not significant connection between concentration of similar enterprises and productivity of labour was found. Eriksson et al (2007) studied effects of localisation, urbanisation and scale of job changes in Swedish LA regions, and suggested that the concentration of similar activities may be gainful for small regions. Engelstoft et al (2005)-- reported that little evidence supports the claims concerning the existence and performance of frequently identified and examined industrial clusters in Denmark. Therefore, economic growth should incorporate a broad set of economic agents and recognize that these firms and workplaces are nested in spatial hierarchies.

6. 6 Workplace, working square, local area, hinterland (totally 180 000 workplaces and 60 000 working square)

7. 7 Two dimensions of workplace attributes four categories—labour force, business environment, local demand, and external demand factors four spatial scales— workplace, working square, local area, and hinterland

8. 8 Data Sources: Astrid--an individual longitude database that is collected by Statistics Sweden (SCB). the Swedish Red Map—1: 250 000 Swedish national general maps by Swedish Land Survey (Lantmäteriet).

9. 9 Indicator of regional growth Full model and partial models Y = the change of workplace working income within five years (1998-2003) The study period (1998 – 2003) was almost a small economic cycle, including a growth peak (4.5% in 1999) and a bottom (1.1% in 2001)

10. 10 Totally 32 explanatory variables in the four spatial scales

11. 11 OLS Full model Yi = β 0 + β 1 X 1i + β 2 X 2i … + β k X ki + ε i for k independent variables Total explained variance is 28.58%. Using 36 partial OLS models to identify intervals of partial explanatory effect of variables in each spatial scale and category.

12. 12 Partial explanatory effects of the endogenous factors in spatial scales and categories

13. 13 Findings (1): Among the four categories, labour force factor is the most important condition, business environment is the second important one, and local demand is more important than external demand. Among the spatial scales the working-square (km square) plays bigger role than the scales of workplace, local area and hinterland.

14. 14 Findings (2): Both endogenous and exogenous growths exist According to the full model, about one third of the growth is achieved by the factors of daily-reach area, indicating that endogenous growth counts about one third of total regional growth. Both diversity and localisation contribute to economic performance positively only within optimum distances. Labour force (people) matters. Geography matters!