Co-evolution of producer services and other sectors

Abstract

A major characteristic of the economic development in Sweden during the past 10–15 years is a fast expansion of the producer-service sector. To analyse this process, the present paper employs an approach to identify the spatial pattern of local, regional and extra-regional demand for producer services. In the associated theoretical model producer-service firms grow in locations with large market access. The estimated model predicts that the supply of producer services grows in urban areas with large market access, whereas the rest of the economy shrinks in the same areas and expands in other parts of the urban region. The change process is interpreted as an effect of firms’ outsourcing of service activities when they can rely on accessibility to service suppliers. As a result service suppliers agglomerate in central parts of the urban region, where they obtain high accessibility to their customers. The estimated change process comprises a non-linear response mechanism.