Spatial spillovers and employment growth in the service sector

This article examines the impact of local knowledge spillovers on employment growth in the service sector at both the theoretical and empirical level. It is argued that, in addition to life cycle and tradability effects, spillovers in services are likely to be strongly influenced by distinctive service characteristics and labour-related factors, which impact on the channels through which spillovers are transmitted. Empirical models of employment growth suggest significant differences in spillover effects between industry and services and across public, private, business and personal services. In particular, many services appear to benefit from spillovers arising from a diverse local economy.