The Relationship between Agglomeration Economies and Firm Profitability

How does the profitability of manufacturing plant depend on whether it is located inside or outside the industry cluster? Using the measure of industrial concentration on NUTS 2 regional level in European Union, this thesis aims to investigate its relation with two profitability indicators for single manufacturing plants. One year cross sectional dataset with more than 410 thousands of firms observed is used for analysis. The results of tests of hypotheses point towards ambiguousness of effect of agglomeration economies on profitability of firms and suggest changes in approaches of further researches.