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Related variety, unrelated variety and regional economic growth

[journal article]

Frenken, Koen; Oort, Frank van; Verburg, Thijs Nicolaas

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Abstract In economic theory, one can distinguish between variety as a source of regional knowledge spillovers, called Jacobs externalities, and variety as a portfolio protecting a region from external shocks. We argue that Jacobs externalities are best measured by related variety (within sectors), while the portfolio argument is better captured by unrelated variety (between sectors). We introduce a methodology based on entropy measures to compute related variety and unrelated variety. Using data at the NUTS-3 level in the Netherlands for the period 1996-2002 we find that Jacobs externalities enhance employment growth, while unrelated variety dampens unemployment growth. Productivity growth can be explained by traditional determinants including investments and R&D expenditures. Implications for regional policy follow
Classification Political Economy; Area Development Planning, Regional Research
Document language English
Publication Year 2007
Page/Pages p. 685-697
Journal Regional Studies, 41 (2007) 5
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)