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Productivity and the geographic concentration of industry: The role of plant scale

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  • Wheeler, Christopher H.

Abstract

A large body of research has established a positive connection between an industry's productivity and the magnitude of its presence within locally defined geographic areas. This paper examines the extent to which this relationship can be explained by a micro-level underpinning commonly associated with productivity: establishment scale. Looking at data on two-digit manufacturing across a sample of U.S. metropolitan areas, I find two primary results. First, average plant size - defined in terms of numbers of workers - increases substantially as an industry's employment in a metropolitan area rises. Second, results from a decomposition of localization effects on labor earnings into plant-size and plant-count components reveal that the widely observed, positive association between a worker's wage and the total employment in his or her own metropolitan area-industry derives predominantly from the former, not the latter. Localization economies, therefore, appear to be the product of plant-level organization rather than pure population effects.

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Bibliographic Info

Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 36 (2006)
Issue (Month): 3 (May)
Pages: 313-330

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Handle: RePEc:eee:regeco:v:36:y:2006:i:3:p:313-330

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  28. repec:fth:prinin:338 is not listed on IDEAS
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Citations

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Cited by:
  1. Octávio Figueiredo & Paulo Guimarães & Douglas Woodward, 2008. "Vertical Disintegration in Marshallian Industrial Districts," FEP Working Papers 280, Universidade do Porto, Faculdade de Economia do Porto.
  2. Fu, Shihe & Hong, Junjie, 2008. "Testing urbanization economies in manufacturing industries: urban diversity or urban size?," MPRA Paper 10078, University Library of Munich, Germany.
  3. Alejandra Trejo, 2011. "Competitiveness And The Regional Efficiency Of The Mexican Service Sector," ERSA conference papers ersa10p196, European Regional Science Association.
  4. Christopher H. Wheeler, 2009. "Technology and industrial agglomeration: Evidence from computer usage," Papers in Regional Science, Wiley Blackwell, vol. 88(1), pages 43-62, 03.
  5. J. Knoben, 2009. "Localized inter-organizational linkages, agglomeration effects, and the innovative performance of firms," The Annals of Regional Science, Springer, vol. 43(3), pages 757-779, September.
  6. Elif Alkay & Geoffrey Hewings, 2012. "The determinants of agglomeration for the manufacturing sector in the Istanbul metropolitan area," The Annals of Regional Science, Springer, vol. 48(1), pages 225-245, February.
  7. Decker, Christopher S. & Thompson, Eric C. & Wohar, Mark E., 2009. "Determinants of State Labor Productivity: The Changing Role of Density," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 39(1).
  8. Christopher H. Wheeler, 2005. "Do localization economies derive from human capital externalities?," Working Papers 2005-015, Federal Reserve Bank of St. Louis.
  9. Christopher H. Wheeler, 2004. "Productivity and the geographic concentration of industry: the role of plant scale," Working Papers 2004-024, Federal Reserve Bank of St. Louis.
  10. Joshua Drucker, 2009. "Trends in Regional Industrial Concentration in the United States," Working Papers 09-06, Center for Economic Studies, U.S. Census Bureau.

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