Reflections on Cluster Policies

Abstract

Economic activity tends to cluster. This results in productivity gains. For policy makers this offers an opportunity to formulate and promote policies that foster clustering of economic activity. Paradoxically, although agglomeration rents are often found in empirical research a rationale for cluster policies does not exist. A brief tour through the literature shows that cluster policies face more problems than is often assumed in policy circles. We reflect on the main issues at stake and conclude that, if not carefully applied, cluster policy may do more harm than good.