The Rationale of spatial economic top sector policy

16/01/2014 09:30

Cities and clusters are important from an economical point of view. According to various national and international studies, agglomeration economies mean that businesses in urban areas and clusters are more productive, experience greater growth and are more innovative than businesses located in non-urban areas. However, this does not apply to every type of business; nor is every type of urban area a dynamic motor for economic growth: there can even be considerable differences in the functioning and performance of regional economies within the Netherlands.

A region’s performance is partly related to its economic structure; a region in which there are many growth sectors will, for example, often experience high economic growth (a compound effect). However, the type of commercial activity in the local area also provides businesses with a form of economic power. The presence of other activities affects, for example, the extent to which a company can profit from knowledge spillovers, or the size of a local specialised labour market or supply and demand market. Various aspects of the business environment also affect the functioning and performance of companies, or the extent to which a region is considered an attractive location for a company. Examples are accessibility (by road, public transport and air), the presence of centres of expertise, the quality of the labour force and the availability of various facilities. In summary, economic success is driven to a large extent by the regions, or can be related to the regional context in which businesses operate.

The finding that regions are important to the economy therefore raises the question of whether, and if so how, spatial economic policy can contribute to the success of urban economies and clusters. The Dutch Ministry of Economic Affairs (EZ) has posed an additional question regarding the rationale behind national spatial economic policy; if the regions are important, does this mean that they themselves are responsible for their development, or should we be looking at an active role for the national government? This is an interesting question, particularly in light of the government’s recent top sectors policy, which barely touches on the spatial economic perspective.
This question is addressed in this memorandum. To find the answer, we have investigated the pros and cons of spatial economic policy, both in general and more specifically in relation to the top sectors. Both the philosophy of the top sectors policy and the choice of top sectors are beyond the scope of this memorandum. We are primarily interested in presenting the facts and figures related to the top sectors and their spatial distribution: information that until now has not been addressed in the top sectors debate. With this in mind, PBL Netherlands Environmental Assessment Agency, together with Statistics Netherlands, quite literally has ‘mapped’ the top sectors (see Appendix 1 for further explanation). However, before presenting these facts and figures, top sectors policy is first described from a historical perspective.