Do labour-managed firms benefit from agglomeration?

Panel data on the entry of labour-managed firms in the Basque Country are used to test for the presence of agglomeration externalities. A variety of controls are employed to deal with the identification problem that confronts any attempt to measure such effects. Consistent with theoretical arguments, we find evidence of positive non-industry-specific externalities among labour-managed firms. Our results do not rule out the additional presence of industry-specific externalities among such firms, but do indicate an absence of externalities flowing from capitalist to labour-managed firms.

► We test for agglomeration externalities among labour-managed firms.
► Panel data from Basque Country.
► Strong evidence of positive non-industry-specific externalities.
► Industry-specific externalities are not ruled out.
► Results suggest no externalities flowing from capitalist to labour-managed firms.