Ratio Working Papers
Spatial Concentration in the Financial Industry
Abstract: This paper investigates factors that determine the spatial
concentration in the financial industry. Why does the financial industry
have such a high spatial concentration? The theoretical framework is based
on theories from regional economics, with a focus on agglomeration effects,
externalities, and the regional clustering of an industry. The positive
agglomeration effects arise from access to i) specialized labor, ii)
specialized suppliers, and iii) knowledge dispersion (Marshall 1920).
Jacobs (1961, 1969) contributes to a discussion of the role of cities
(urban economies) in terms of innovations and entrepreneurship. The high
degree of spatial concentration in the financial sector emphasizes the
importance of local embeddedness, networks, face-to-face communication,
knowledge spillovers, and spatial proximity for the organization of the
financial industry. These factors accentuate the importance of local
knowledge and the dispersion of knowledge, factors that have been
thoroughly discussed and analyzed in the field of Austrian economics.
Therefore, an Austrian view is included to examine the role of knowledge in
the spatial concentration of financial centers. Scholars such as Hayek
(1937; 1945) and Lachmann (1978 ) contribute to understanding the use
of knowledge in society.
Keywords: Spatial Concentration; Financial Industries; Knowledge; Information; Face-to-face communication; (follow links to similar papers)
JEL-Codes: B26; B53; D53; (follow links to similar papers)
32 pages, February 28, 2012
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