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Solving the ecological fallacy problem in the analysis of agglomeration economies: a spatial hierarchical approach



Mantegazzi D.



Economic theory claims that the economic performance of regions and firms is enhanced by the existence of agglomeration economies in the regions. Moreover, different typologies of agglomeration economies are hypothesized to boost regional growth. In contrast with the theory, however, different recent empirical studies show ambiguous results. Recent overviews point out that this ambiguity may be due to a lack of research on the relationship between agglomeration externalities and individual firm performance. The heterogeneity affects the relation between firms’ productivity and agglomeration economies. This is a typical case of ecological fallacy, which is an error of deduction that involves deriving conclusions about individuals solely on the basis of an analysis of group data. My doctoral work aims to solve this ambiguity and is driven by one underlying research question: does it still make sense to use cluster theories in order to analyze the performance of regions and firms? Additionally, my research will also consider spatial interactions at both firms and regional levels. Specifically, it would like to establish whether the performance of firms and regions is affected by neighbor regions and firms. From a methodological point of view, I will apply hierarchical or multilevel models (MLM), which allow to deal with ecological fallacies by simultaneously modeling the micro and the macro levels. It will be one of the first application of hierarchical model to the performance of firms and regions. Moreover, it will be the first application combining multilevel models and spatial econometrics in the field of regional economics. Thus, I will be able to capture neighborhood effects and spatial interactions across different levels of the hierarchy. The aim of my research is to apply this model in order to explain the productivity of firms by (i) the characteristics at the firm level, (ii) the characteristics at the regional level and (iii) the interaction between these two levels. Concerning the content, my research discusses the validity of cluster policies, aiming to understand if and how these policies affect the performance of firms and regions. From this viewpoint, heterogeneity plays a key role at both firm and regional levels. Indeed, the idea behind is that various forms of agglomeration may influence in different ways the performance of diverse types of firms.

Additional information

Start date
End date
31 Months
Funding sources
Swiss National Science Foundation / Doc.CH