We built a model analyzing the importance which the natural advantages and local resources are in the manufacturing industry location, in relation with the "spillovers" effects and industrial policies. To this, we estimate the Rybczynski equation matrix for the various manufacturing industries in Portugal, at regional level (NUTS II) and for the period 1986 to 1994. As a summary conclusion, noted that the location of manufacturing in Portugal is still mostly explained by specific factors, with a tendency to increase in some cases the explanation by these factors, having the effect "spillovers" and industrial policies little importance in this context.geographical concentration; Portuguese regions; linear models

Martinho, Vítor João Pereira Domingues

English

Research Papers in Economics

  1 
A MODEL BASED ON THE RYBCZYNSKI EQUATION FOR 
PORTUGAL 
 
Vitor João Pereira Domingues Martinho 
 
Unidade de I&D do Instituto Politécnico de Viseu 
Av. Cor. José Maria Vale de Andrade 
Campus Politécnico 
3504 - 510 Viseu 
(PORTUGAL) 
e-mail: vdmartinho@esav.ipv.pt 
 
 
ABSTRACT 
 
We built a model analyzing the importance which the natural advantages and local resources are in 
the manufacturing industry location, in relation with the "spillovers" effects and industrial policies. To this, we 
estimate the Rybczynski equation matrix for the various manufacturing industries in Portugal, at regional level 
(NUTS II) and for the period 1986 to 1994. As a summary conclusion, noted that the location of manufacturing 
in  Portugal  is  still  mostly  explained  by  specific  factors,  with  a  tendency  to  increase  in  some  cases  the 
explanation  by  these  factors,  having  the  effect  "spillovers"  and  industrial  policies  little  importance  in  this 
context. 
 
Keywords: geographical concentration; Portuguese regions; linear models. 
 
  1. INTRODUCTION 
 
In this work, taking into account the work of (1)Kim (1999), seeks to analyze the importance of the 
natural  advantages  and  local  resources  (specific  factors  of  locations)  have  in  explaining  the  geographic 
concentration  over  time  in  the  Portuguese  regions,  relatively  effects  "spillovers"  and  industrial  policies  (in 
particular, the modernization and innovation that have allowed manufacturing in other countries take better 
advantage of positive externalities). For this, we estimated the Rybczynski equation matrix for the different 
manufacturing industries in the regions of Portugal, for the period 1980 to 1999. It should be noted that while 
the  model  of  inter-regional  trade,  the  Heckscher-Ohlin-Vanek,  presents  a  linear  relationship  between  net 
exports and inter-regional specific factors of locations, the Rybczynski theorem provides a linear relationship 
between regional production and specific factors of locations. In principle, the residual part of the estimation of 
Rybczynski,  measured  by  the  difference  between  the  adjusted  degree  of  explanation  (R2)  and  the  unit 
presents a approximated estimate of the importance not only of the "spillovers” effects, as considered by Kim 
(1999),  but also  of  the  industrial policies,  because, industrial  policies  of  modernization  and innovation are 
interconnected with the "spillover" effects. However, it must be some caution with this interpretation, because, 
for  example,  although  the growth  of  unexplained  variation  can  be  attributed  to  the  growing  importance  of 
externalities "Marshallians" or "spillovers" effects and industrial policies, this conclusion may not be correct. 
Since the "spillovers" effects and industrial policies are measured as a residual part, the growth in the residual 
can be caused, also, for example, by growth in the randomness of the location of the products manufactured 
and the growing importance of external trade in goods and factors. 
The designation of externalities "Marshallians" or "spillovers" effects, is because (2)Marshall (1920) 
have identified in a systematic way the causes of geographical concentration in industrial activities. Some 
recent  works  in  these  areas  of  thought,  have  sought  to  precisely  identify  solutions  to  these  and  other 
assumptions,  present  in  some  works,  such  as  (3)Krugman  (1991),  (4)Krugman  (1992),  (5)Krugman  et  al. 
(1995), (6)Fujita et al. (1999), (7)Matsuyama (1991), (8)Gali (1994) and other related with spatial issues. It is 
also  important  to  note  that  Marshall  identifies  the  natural  advantages  as  a  major  cause  of  geographical 
concentration (Kim, 1999). Another classification for the causes of concentration was made by (9)Scitovsky 
(1954), in other words, this author made a distinction between technological externalities, materialized through 
interactions unrelated to the market that directly affect consumers' utility or production functions of companies 
and pecuniary externalities that result from market interactions, in the proportion that companies engage in 
trade of products. 
 
2. THE BASE MODEL  
 
The base model is then the following (10)(Martinho, 2011): 
Alert! This author has published many duplicate versions of very similar papers with slightly 
different titles, but without an appropriate notice. This may apply to this contribution, too.   2 
            it it it it it on Constructi Energy e Agricultur Labor Y ln ln ln ln ln 4 3 2 1  
 
  In this context, it is expected that there is, above all, a positive relationship between the production of 
each of the manufacturing industry located in a region and that region-specific factors required for this industry, 
in particular, to emphasize the more noticeable cases, between food industry and agriculture, among the textile 
industry and labor (given the characteristics of this industry), among the industry of metal products and metal 
and mineral extraction and from the paper industry and forest. 
 
3. STATISTICAL DATA USED 
 
Taking into account the variables of the model presented previously, we used statistical data of the 
five temporal regions of mainland Portugal, from the regional database of Eurostat statistics (Eurostat Regio of 
Statistics 2000). The data are relative to regional gross value added of agriculture, fisheries and forestry, the 
industry of fuel and energy products, each of manufacturing industry and construction and public works. We 
used also data relating to employees in each of the manufacturing industries. 
 
4. THE ESTIMATES MADE 
 
In the results presented, there is a strong positive relationship between gross value added and labor. 
On the other hand, there is an increased dependence on natural and local  resources. We found that the 
location of manufacturing industry is yet mostly explained by specific factors of locations, with a tendency to 
increase in some cases and poorly explained by "spillovers" effects and industrial policies.  
 
5. SOME CONCLUSIONS 
 
In short, be noted that the location of the Portuguese manufacturing industry is still mostly explained 
by specific factors of locations, with a tendency to increase in some cases, capital has little influence on this 
location and the industrial policies of modernization and innovation are not relevant, especially those that have 
come from the European Union, what is more worrying. 
 
  6. REFERENCES 
 
1. S. Kim. Regions, resources, and economic geography: Sources of U.S. regional comparative advantage, 
1880-1987. Regional Science and Urban Economics (29), 1-32 (1999). 
2. A. Marshall. Principles of Economics. McMillan 1920. 
3.  P.  Krugman.  Increasing  returns  and  economic  geography.  Journal  of  Political  Economy  (99),  183-199 
(1991). 
4. , P. Krugma. A dynamic spatial model. NBER Working Paper 4219 1992. 
5. P. Krugman and A. Venables. Globalization and the inequality of nations. Quarterly Journal of Economics 
(110), 617-650 (1995). 
6. M. Fujita; P. Krugman; and A. Venables. The Spatial Economy. Cities, Regions and International Trade. MIT 
Press, Cambridge MA 1999. 
7. K. Matsuyama. Increasing returns, modernization, and indeterminacy of equilibrium. Quarterly Journal of 
Economics (106),  617-650 (1991). 
8. J. Galì. Local externalities, convex adjustment costs, and sunspot equilibria. Journal of Economic Theory 
(64), 242-252 (1994). 
9. T. Scitovsky. Two concepts of external economies. Journal of Political Economy (62), 143-151 (1954). 
10. V.J.P.D. Martinho. Geographic concentration in Portugal and regional specific factors. MPRA Paper 32317, 
University Library of Munich, Germany (2011). 
 
 
Alert! This author has published many duplicate versions of very similar papers with slightly 
different titles, but without an appropriate notice. This may apply to this contribution, too. 

A dynamic spatial model.

Geographic concentration in Portugal and regional specific factors. MPRA Paper 32317,

Globalization and the inequality of nations.

Increasing returns and economic geography.

Increasing returns, modernization, and indeterminacy of equilibrium.

Local externalities, convex adjustment costs, and sunspot equilibria.

Principles of Economics.

Regions, resources, and economic geography: Sources of U.S. regional comparative advantage,

The Spatial Economy. Cities, Regions and International Trade.

Two concepts of external economies.

A model based on the Rybczynski equation for Portugal

A model based on the Rybczynski equation for Portugal

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Research Papers in Economics