Affiliation: | 1. Department of International Economics & Business, Faculty of Economics and Business, University of Groningen, PO Box 800, NL‐9700 AV Groningen, The Netherlands (e‐mail: e.m.bosker@rug.nl, j.h.garretsen@rug.nl);2. The first author worked on this version of the paper while visiting OxCarre, Faculty of Economics, University of Oxford. We thank an anonymous referee, Jos van Ommeren, Steven Brakman, Henri de Groot, Gert‐Jan Linders, Joppe de Ree and Marc Schramm for useful comments and suggestions. This paper builds on and extends Chapter 2 of Bosker's PhD thesis ( Bosker 2008). |