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The specialization of city-centres towards more advanced service activities has mostly been studied in the largest city-regions, the case of smaller urban centres being less well documented. In that context, the objective of this article is to analyse the role of sectoral and regional factors in employment growth in Luxembourg between 1994 and 2005. Using statistical data from the Luxembourg General Inspection of Social Security, this contribution distinguishes 12 categories of manufacturing industries and services according to an OECD-Eurostat knowledge-based classification. Five intra-regional areas are distinguished based on morphological and functional criteria in the Luxembourg Metropolitan Area. Using several indexes, this article first analyses the sectoral specialization and geographical concentration of employment. A model of intra-regional employment growth, initially developed by Marimon and Zilibotti and applied at the European level, is then shown to account for 40 per cent of employment growth. An estimation of the contributions of sectoral and geographical factors highlights the primacy of the latter over the former. Finally, the construction of virtual economies confirms the City's overall lower performance as compared to its close periphery. Results underscore a process of functional integration in the Luxembourg metropolitan area: as the core of the city undergoes a specialization process, the urban area benefits from a relocation of activities less sensitive to distance and transaction costs, while the periphery becomes increasingly diversified, notably in the South where traditional industrial activities are being replaced by service activities. These results suggest that the evolution pattern of employment growth in Luxembourg is very similar to that of some larger metropolitan centres, owing to its exceptional financial service activities.

Keywords: Luxembourg; employment growth; intra-regional activities; urban economic geography; virtual economy

Document Type: Research Article


Affiliations: 1: Department of Geography, Centre for Population, Poverty and Public Policy, Studies (CEPS/INSTEAD), P.O. Box 48, L-4501 Differdange, Luxembourg., Email: 2: Enterprise Research Unit, Centre for Population, Poverty and Public Policy, Studies (CEPS/INSTEAD), P.O. Box 48, L-4501 Differdange, Luxembourg., Email:

Publication date: 2010-03-01

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