The Impact of Spatial Clustering on the Labour Productivity of the UK Tourism and Hospitality Industry

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This research aims to investigate the impact of spatial clustering of T&H firms on the labour productivity of the UK T&H industry, specifically on the implications of agglomeration economies for labour productivity both within (direct effects, accounting for spatial feedback effects) and between (indirect spatial spillover effects) spatial units. Employing under-exploited micro-level datasets from the UK Office for National Statistics, the impact of spatial clustering and agglomeration economies (labour market pooling and knowledge spillovers) on T&H labour productivity within and between local authority districts (LADs) was examined using spatial panel modelling. Based on 373 LADs across England, Scotland and Wales and for the period 2006-2016, the fixed-effect spatial Durbin panel model was estimated. Findings concluded that the increase in the degree of clustering of T&H firms has had negative effects on labour productivity of T&H firms within the LADs but also across, and from, neighbouring LADs and back. Labour market pooling variables have shown positive effects regarding the pool of skilled labour but the effects on productivity were negative in terms of the share in high-skilled jobs. Knowledge spillover effects on labour productivity of T&H firms within a LAD were insignificant, but when considering its spatial spillover effects, they were complementary, suggesting the importance of human capital externalities and their spillover effects across geographical boundaries. Moreover, the long-run effects of agglomeration economies were significantly greater than the short-run effects on the labour productivity of T&H firms within and between LADs, suggesting the need to take a long-run perspective on how spatial clustering and agglomeration economies affect T&H labour productivity within and between neighbouring regions. Using geographically weighted regression modelling, significant spatial variations in the relationship between spatial clustering and agglomeration economies and T&H labour productivity were identified within each LAD but also spillover effects across the neighbouring districts.