Skip to main content
Download PDF

The urban knowledge economy and employment growth: a spatial structural equation modeling approach

The Annals of Regional Science volume 43, Article number: 859 (2009) Cite this article

Abstract

Many European governments have been stimulating their urban economies by focusing on knowledge economy potentials of metropolitan regions, especially R&D-based indicators. We analyze employment growth in terms of conventional determinants—investments, wages, income, and specialization indices of industrial, distribution and business services activities—and three latent knowledge economy components (density of knowledge workers, R&D and innovativeness) for the Netherlands based on a sample of 496 municipalities. We apply a structural equation model (SEM) made up of a measurement model that relates the latent knowledge economy components to their observable indicators and a structural model that estimates the impacts of the determinants on employment growth. In addition to the conventional determinants and the knowledge economy components, the SEM accounts for spatial spillover effects, degree of urbanization and core-periphery dichotomy. The latent variables ‘density of knowledge workers’ and ‘innovativeness’ have significant and strong impacts. Since they are more common in larger than smaller urban agglomerations, we conclude that the impacts of these variables on employment growth are stronger in the former than the latter. The latent variable ‘R&D-intensity’ is not significantly, positively related to urban employment growth. This suggests that policy should emphasize innovation output and knowledge workers density rather than R&D to capture urban growth potentials in the knowledge economy.

References

  • Acs ZJ (2002) Innovation and the growth of cities. Edward Elgar, Cheltenham

    Google Scholar 

  • Acs Z, Varga A (2002) Introduction to the special issues on regional innovation systems. Int Reg Sci Rev 25:3–7. doi:10.1177/016001702762039358

    Article  Google Scholar 

  • Anselin L (1988) Spatial econometrics: methods and models. Kluwer, Dordrecht

    Google Scholar 

  • Anselin L, Varga A, Acs ZJ (2000) Geographical and sectoral characteristics of academic knowledge externalities. Pap Reg Sci 79:435–443. doi:10.1007/PL00011486

    Article  Google Scholar 

  • Audretsch DB, Feldman MP (1996) R&D spillovers and the geography of innovation and production. Am Econ Rev 86: 630–640

    Google Scholar 

  • Bates T (1990) Entrepreneur human capital inputs and small business longevity. Rev Econ Stat LXXII: 551–559. doi:10.2307/2109594

    Article  Google Scholar 

  • Batten D (1995) Network cities: creative urban agglomerations for the 21st century. Urban Stud 32:313–327. doi:10.1080/00420989550013103

    Article  Google Scholar 

  • Black G (2004) The geography of small firm innovation. Kluwer, Dordrecht

    Google Scholar 

  • Black S, Lynch L (2001) How to compete: the impact of workplace relations and information technology on productivity. Rev Econ Stat 83(3):434–445

    Article  Google Scholar 

  • Broersma LJ, van Dijk J (2002) Regional labour market dynamics in the Netherlands. Pap Reg Sci 81: 343–363. doi:10.1007/s101100200126

    Article  Google Scholar 

  • Broersma LJ, Oosterhaven J (2005) Regional differences in labour productivity in the Netherlands. Tijdschr Econ Soc Geogr 96:334–343. doi:10.1111/j.1467-9663.2005.00464.x

    Article  Google Scholar 

  • Camagni R, Capello R (2004) The city network paradigm: theory and empirical evidence. In: Capello R, Nijkamp P (eds) Urban dynamics and growth. Elsevier, Amsterdam, pp 495–529

  • Capello R, Nijkamp P (eds) (2004) Urban dynamics and growth. Advances in urban economics. Elsevier, Amsterdam

    Google Scholar 

  • Clement W, Hammerer G, Schwarz K (1998) Intangible capital from an evolutionary perspective. OECD, Paris

    Google Scholar 

  • Combes PP (2000) Economic structure and local growth: France 1984–1993. J Urban Econ 47:329–355. doi:10.1006/juec.1999.2143

    Article  Google Scholar 

  • Cooke P, Morgan K (1998) The associational economy. Firms, regions and innovation. University Press, Oxford

    Google Scholar 

  • Cortright J, Mayer H (2001) High-tech specialization: a comparison of high-tech centres. The Brookings Survey papers, pp 1–18

  • Dosi G (1988) Sources, producers and microeconomic effects of innovation. J Econ Lit 26: 1120–1171

    Google Scholar 

  • Drennan MP (2002) The information economy and American cities. The Johns Hopkins University Press, Baltimore

    Google Scholar 

  • Drucker P (1959) Landmarks of tomorrow: a report on the new post-modern world. Harper, New York

    Google Scholar 

  • Feldman MP (1994) The geography of innovation. Kluwer, Dordrecht

    Google Scholar 

  • Florax RJGM, Folmer H, Rey S (2003) Specification searches in spatial econometrics: the relevance of Hendry’s methodology. Reg Sci Urban Econ 33:557–579. doi:10.1016/S0166-0462(03)00002-4

    Article  Google Scholar 

  • Florida R (2002) The rise of the creative class. Basic Books, New York

    Google Scholar 

  • Foray D (2004) The economics of knowledge. The MIT Press, Cambridge

    Google Scholar 

  • Glaeser EL, Maré DC (2001) Cities and skills. J Labor Econ 19:316–342. doi:10.1086/319563

    Article  Google Scholar 

  • Glaeser EL, Saiz A (2003) The rise of the skilled city. Working paper 10191. National Bureau of Economic Research, Cambridge

  • Glaeser EL, Kallal HD, Scheinkman JA, Shleifer A (1992) Growth in cities. J Polit Econ 100:1126–1152. doi:10.1086/261856

    Article  Google Scholar 

  • Godin B (2004) The new economy: what the concept owes to the OECD. Res Policy 23:679–690. doi:10.1016/j.respol.2003.10.006

    Article  Google Scholar 

  • Hall P (1966) The world cities. Weidenfeld and Nicolson, London

    Google Scholar 

  • Hall P (2000) Creative cities and economic development. Urban Stud 37:639–649. doi:10.1080/00420980050003946

    Article  Google Scholar 

  • Henderson JV (1997) Externalities and industrial development. J Urban Econ 42:47–70. doi:10.1006/juec.1997.2036

    Article  Google Scholar 

  • Jöreskog KG, Sörborn D (1996) LISREL 8: user’s reference guide. Scientific Software International, Chicago

  • Jaffe A, Trajtenberg M (2002) Patents, citations and innovation. A window on the knowledge economy. The MIT Press, Cambridge

    Google Scholar 

  • Jaffe AB, Trajtenberg M, Henderson R (1993) Geographic localization of knowledge spillovers as evidenced by patent citations. Q J Econ 36:577–598. doi:10.2307/2118401

    Article  Google Scholar 

  • Lucas RE (1988) On the mechanism of economic development. J Monet Econ XXII:3–42. doi:10.1016/0304-3932(88)90168-7

    Article  Google Scholar 

  • Lucas RE (1993) Making a miracle. Econometrica 61:251–272. doi:10.2307/2951551

    Article  Google Scholar 

  • Machlup F (1962) The production and distribution of knowledge in the United States. University Press, Princeton

    Google Scholar 

  • Mathur VK (1999) Human-capital-based strategy for regional economic development. Econ Dev Q XIII:203–216. doi:10.1177/089124249901300301

    Article  Google Scholar 

  • McCann P (2004) Urban scale economies: statics and dynamics. In: Capello R, Nijkamp P (eds) Urban dynamics and growth. Elsevier, Amsterdam, pp 31–56

  • McCloskey DN, Klamer A (1995) One quarter of GDP is persuasion. Am Econ Rev 85: 191–195

    Google Scholar 

  • Neale MC, Boker SM, Xie G, Maes HH (2003) Mx: statistical modeling, 6th edn. Department of Psychiatry, Richmond

    Google Scholar 

  • OECD (2003) Science. Technology and Industry Scoreboard, Paris

  • Oud JHL, Folmer H (2008) A structural equation approach to models with spatial dependence. Geogr Anal 40:152–166

    Article  Google Scholar 

  • Van Oort FG (2004) Urban growth and innovation. Ashgate, Aldershot

    Google Scholar 

  • Van Oort FG, Burger M, Raspe O (2008) Inter-firm relations and economic clustering in the Dutch Randstad region. In: Blien U, Maier G (eds) The economics of regional clusters. Networks, technology and policy. Edward Elgar, Cheltenham, pp 145–165

  • Parr JB (2005) Perspectives on the city-region. Reg Stud 39:555–566. doi:10.1080/00343400500151798

    Article  Google Scholar 

  • Raspe O, Van Oort FG (2006) The knowledge economy and urban economic growth. Eur Plann Stud 14:1209–1234. doi:10.1080/09654310600933322

    Article  Google Scholar 

  • Rosenthal SS, Strange W (2004) Evidence on the sources of agglomeration economies. In: Henderson JV, Thisse JF (eds) Handbook of regional and urban economics. Elsevier, Amsterdam, pp 2119–2172

  • Saviotti PP, Pyka A (2004) Economic development, variety and employment creation. Rev Econ 55: 1023–1059

    Google Scholar 

  • Surinach J, Moreno R, Vaya E (eds) (2007) Knowledge externalities, innovation clusters and regional development. Edward Elgar, Cheltenham

  • Thissen MJPM (2005) The size of agglomeration economies in the Netherlands. An analysis with a spatial CGE-model. Working paper. RPB, The Hague

    Google Scholar 

  • Wallsten SJ (2001) An empirical test of geographic knowledge spillovers using geographic information systems and firm-level data. Reg Sci Urban Econ 31: 571–599

    Article  Google Scholar 

  • Warsh D (2006) Knowledge and the wealth of nations. W.W. Norton, New York

    Google Scholar 

  • Wever E, Stam E (1999) Clusters of high-technology SME’s: the Dutch case. Reg Stud 33: 391–400

    Article  Google Scholar 

Download references

Open Access

This article is distributed under the terms of the Creative Commons Attribution Noncommercial License which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

Author information

Affiliations

  1. Department of Economic Geography, Utrecht University, Utrecht, The Netherlands

    Frank G. van Oort

  2. Radboud University Nijmegen, Nijmegen, The Netherlands

    Johan H. L. Oud

  3. Netherlands Environmental Assessment Agency, The Hague, The Netherlands

    Otto Raspe

Authors
  1. Frank G. van Oort
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Johan H. L. Oud
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Otto Raspe
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Frank G. van Oort.

Rights and permissions

Open Access This is an open access article distributed under the terms of the Creative Commons Attribution Noncommercial License (https://creativecommons.org/licenses/by-nc/2.0), which permits any noncommercial use, distribution, and reproduction in any medium, provided the original author(s) and source are credited.

Reprints and Permissions

About this article

Cite this article

van Oort, F.G., Oud, J.H.L. & Raspe, O. The urban knowledge economy and employment growth: a spatial structural equation modeling approach. Ann Reg Sci 43, 859 (2009). https://doi.org/10.1007/s00168-009-0299-2

Download citation

  • Received:

  • Accepted:

  • Published:

  • DOI: https://doi.org/10.1007/s00168-009-0299-2

JEL Classification

  • O31
  • R12
  • R15
  • R58