National and Regional Perspectives
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Edited by Michael Fritsch
Chapter 5: Entrepreneurship, Urbanization Economies, and Productivity of European Regions
5 Entrepreneurship, urbanization economies, and productivity of European regions Niels Bosma INTRODUCTION The literature of regional economic growth has established that differences in regional productivity can to a large extent be explained by the density of economic activity. This effect of ‘urbanization economies’ has been documented for regions in the United States (Ciccone and Hall, 1996) and Europe (Ciccone, 2002). Micro-level foundations of urbanization economies have been investigated since the 1980s and an overview of today’s knowledge is provided in reviews by Rosenthal and Strange (2003, 2004) and Duranton and Puga (2004). Other authors have related urbanization economies to specific characteristics of the labor force in cities such as human capital (Glaeser et al., 1992) and creative class (Florida, 2002).1 In addition, in the tradition of Romer (1986, 1990) and Lucas (1988), urbanization economies have been connected to knowledge, innovation, and technology (Audretsch and Feldman, 1996). An important regional-level mechanism that feeds urbanization effects is knowledge spillovers taking place via Jacobs externalities (Jacobs, 1969). Duranton and Puga (2004) conclude that the different microeconomic mechanisms that may be used to justify the existence of cities generally lead to very similar outcomes. They argue that, while this equivalence means that the concept of ‘urban agglomeration economies’ is robust for many different specifications and microeconomic mechanisms, the problem remains that identifying and separating these mechanisms empirically becomes very difficult. An emerging contribution to regional growth theory comes from the entrepreneurship literature. The reasoning of the importance of entrepreneurship and the surprisingly low...
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