Krugman, Paul, 1992, “Lessons from Massachusetts for EMU,” in The Transition to Economic and Monetary Union in Europe, edited by Francesco Giavazzi and Francisco Torres. Cambridge: Cambridge University Press.
Prepared by Angel Ubide.
Luxembourg’s main steel producer, ARBED, remains one of the largest steel companies in the world, although most steel production now takes place outside Luxembourg.
Some 20 percent of all cross-border workers in the EU work in Luxembourg.
In contrast to real GDP growth, the cyclical coherence between Luxembourg’s and the EU’s employment growth series remained strong during the 1980s and 1990s (Figure 1-1).
Marshall (1890) first described these externalities based on his observation of the concentration of the metallurgical industry in various British cities. These external economies are economies of scale that occur at the level of the industry instead of the firm. They can arise from locational advantages (static external economies) or from knowledge advantages following a learning process (dynamic external economies).
An extreme example is the northern Italian town of Sassuolo which, with some 100 small firms, accounts for 60 percent of the world market in ceramic tiles.