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Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach

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Author Info
Catherine J. Morrison Paul
Donald S. Siegel

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Abstract

Scale economies and agglomeration externalities are alleged to be important determinants of economic growth. To assess these effects, the authors outline and estimate a microfoundations model based on a dynamic cost function specification. This model provides for the separate identification of the impacts of externalities and cyclical utilization on short- and long-run scale economies and input substitution patterns. The authors find that scale economies are prevalent in U.S manufacturing; cost savings and scale effects often attributed to internal inputs may be due to external factors; and supply-side agglomeration effects are greater than demand-side, especially in the long run.

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Publisher Info
Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 89 (1999)
Issue (Month): 1 (March)
Pages: 272-290
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Handle: RePEc:aea:aecrev:v:89:y:1999:i:1:p:272-290

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Bartelsman, Eric J & Caballero, Ricardo J & Lyons, Richard K, 1994. "Customer- and Supplier-Driven Externalities," American Economic Review, American Economic Association, vol. 84(4), pages 1075-84, September. [Downloadable!] (restricted)
  2. Basu, Susanto & Fernald, John G., 1995. "Are apparent productive spillovers a figment of specification error?," Journal of Monetary Economics, Elsevier, vol. 36(1), pages 165-188, August. [Downloadable!] (restricted)
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  3. Burnside, Craig & Eichenbaum, Martin & Rebelo, Sergio, 1993. "Labor Hoarding and the Business Cycle," Journal of Political Economy, University of Chicago Press, vol. 101(2), pages 245-73, April. [Downloadable!] (restricted)
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  4. Burnside, Craig, 1996. "Production function regressions, returns to scale, and externalities," Journal of Monetary Economics, Elsevier, vol. 37(2-3), pages 177-201, April. [Downloadable!] (restricted)
  5. Caballero, Ricardo J. & Lyons, Richard K., 1992. "External effects in U.S. procyclical productivity," Journal of Monetary Economics, Elsevier, vol. 29(2), pages 209-225, April. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Ciaran Driver & Paul Temple & Giovanni Urga, 2005. "Identifying Externalities in UK Manufacturing Using Direct Estimation of an Average Cost Function," Department of Economics Discussion Papers 1005, Department of Economics, University of Surrey. [Downloadable!]
    Other versions:
  2. L. Cuyvers & M. Dumont & G. Rayp & K. Stevens, 2002. "Home Employment Effects of EU Firms' Activities in Central and Eastern European Countries," Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium 02/158, Ghent University, Faculty of Economics and Business Administration. [Downloadable!]
  3. Werner Antweiler & Daniel Trefler, 2002. "Increasing Returns and All That: A View from Trade," American Economic Review, American Economic Association, vol. 92(1), pages 93-119, March. [Downloadable!] (restricted)
    Other versions:
  4. Paolo Epifani & Gino Gancia, 2004. "The Skill Bias of World Trade," Economics Working Papers 833, Department of Economics and Business, Universitat Pompeu Fabra, revised Mar 2007. [Downloadable!]
    Other versions:
  5. Jeffrey Cohen & Catherine Morrison Paul, 2001. "Spatial and Supply/Demand Agglomeration Economies: An Evaluation of State- and Industry-Linkages in the U.S. Food System," Department of Agricultural & Resource Economics, UC Davis, Working Paper Series 1015, Department of Agricultural & Resource Economics, UC Davis. [Downloadable!]
  6. Viladecans-Marsal, Elisabet, 2000. "External Economies And Location Of Industrial Activities. An Analysis Of The Spanish Case," ERSA conference papers ersa00p95, European Regional Science Association. [Downloadable!]
  7. Mendoza, Jorge Eduardo, 2003. "Manufacturing specialization and urban aglommeration in the largest cities of Mexico," MPRA Paper 2854, University Library of Munich, Germany, revised 2003. [Downloadable!]
  8. Ludo Cuyvers & Michel Dumont & Glenn Rayp & Katrien Stevens, 2005. "Home Employment Effects of EU Firms’ Activities in Central and Eastern European Countries," Open Economies Review, Springer, vol. 16(2), pages 153-174, April. [Downloadable!] (restricted)
  9. Jeffrey Cohen & Catherine Morrison Paul, 2001. "Agglomeration Economies and Industry Location Decisions: The Impacts of Vertical and Horizontal Spillovers," Department of Agricultural & Resource Economics, UC Davis, Working Paper Series 1021, Department of Agricultural & Resource Economics, UC Davis. [Downloadable!]
  10. Moreno, Rosina & Lopez-Bazo, Enrique & Artis, Manuel, 2002. "Evaluating the optimality of Spanish industry (1980-1993)," ERSA conference papers ersa02p353, European Regional Science Association. [Downloadable!]
  11. Jeffrey Cohen & Catherine Morrison Paul, 2001. "Public Infrastructure Investment, Costs, and Inter-State Spatial Spillovers in U.S. Manufacturing: 1982-96," Department of Agricultural & Resource Economics, UC Davis, Working Paper Series 1020, Department of Agricultural & Resource Economics, UC Davis. [Downloadable!]
  12. Claudio A. Piga & Giuseppe Medda, 2007. "Technological Spillovers and Productivity in Italian Manufacturing Firms," Discussion Paper Series 2007_17, Department of Economics, Loughborough University, revised Jul 2007. [Downloadable!]
    Other versions:
  13. Gordon H. Hanson, 2000. "Scale Economies and the Geographic Concentration of Industry," NBER Working Papers 8013, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  14. Graciela Chichilnisky & Olga Gorbachev, 2004. "Volatility in the knowledge economy," Discussion Papers 0304-13, Columbia University, Department of Economics. [Downloadable!]
    Other versions:
  15. Subal C. Kumbhakar & Ana Lozano-Vivas, 2004. "Deregulation and Productivity: The Case of Spanish Banks," Economic Working Papers at Centro de Estudios Andaluces E2004/24, Centro de Estudios Andaluces. [Downloadable!]
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  16. Susanto Basu & John Fernald, 2000. "Why Is Productivity Procyclical? Why Do We Care?," NBER Working Papers 7940, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  17. Le Blanc, Gilles, 2000. "Regional Specialization, Local Externalities And Clustering In Information Technology Industries," ERSA conference papers ersa00p168, European Regional Science Association. [Downloadable!]
  18. Kraay, Aart & Raddatz, Claudio, 2005. "Poverty traps, aid, and growth," Policy Research Working Paper Series 3631, The World Bank. [Downloadable!]
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  19. James Adams, 2006. "Learning, internal research, and spillovers †," Economics of Innovation and New Technology, Taylor and Francis Journals, vol. 15(1), pages 5-36, January. [Downloadable!] (restricted)
  20. Paolo Epifani & Gino Gancia, 2004. "Increasing Returns, Imperfect Competition and Factor Prices," Economics Working Papers 953, Department of Economics and Business, Universitat Pompeu Fabra, revised Oct 2005. [Downloadable!]
    Other versions:
  21. Christopher C. Klein, 2007. "Cost and Production Duality with Time Utilization of Capital," Working Papers 200704, Middle Tennessee State University, Department of Economics and Finance. [Downloadable!]
  22. Thomas Döring & Jan Schnellenbach, 2006. "What do we know about geographical knowledge spillovers and regional growth?: A survey of the literature," Regional Studies, Taylor and Francis Journals, vol. 40(3), pages 375-395, May. [Downloadable!] (restricted)
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