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Marshall's Scale Economies

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Author Info
Vernon Henderson

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Abstract

In this paper, using panel data, I estimate plant level production functions that include variables that allow for two types of scale externalities which plants experie nce in their local industrial environments. First are externalities from other plants in the same industry locally, usually called localization economies or, in a dynamic context, Marshall, Arrow, Romer [MAR] economies. Second are externalities from the scale or diversity of local economic activity outside the own industry involving some type of cross- fertilization, usually called urbanization economies or, in a dynamic context, Jacobs economies. Estimating production functions for plants in high tech industries and in capital goods, or machinery industries, I find that local own industry scale externalities, as measured specifically by the count of other own industry plants locally, have strong productivity effects in high tech but not machinery industries. I find evidence that single plant firms both benefit more from and generate greater external benefits than corporate plants. On timing, I find evidence that high tech single plant firms benefit from the scale of past own industry activity, as well as current activity. I find no evidence of urbanization economies from the diversity of local economic activity outside the own industry and limited evidence of urbanization economies from the overall scale of local economic activity.

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File URL: http://www.ces.census.gov/index.php/ces/cespapers?down_key=101632
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 01-17.

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Date of creation: Dec 2001
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Handle: RePEc:cen:wpaper:01-17

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Keywords: CES; economic; research; micro; data; microdata; chief; economist;

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References listed on IDEAS
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  1. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October. [Downloadable!] (restricted)
  2. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March. [Downloadable!] (restricted)
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  3. Arellano, Manuel & Bond, Stephen, 1991. "Some Tests of Specification for Panel Data: Monte Carlo Evidence and an Application to Employment Equations," Review of Economic Studies, Blackwell Publishing, vol. 58(2), pages 277-97, April. [Downloadable!] (restricted)
  4. Duncan Black & Vernon Henderson, 2003. "Urban evolution in the USA," Journal of Economic Geography, Oxford University Press, vol. 3(4), pages 343-372, October.
  5. Eaton, Jonathan & Eckstein, Zvi, 1997. "Cities and growth: Theory and evidence from France and Japan," Regional Science and Urban Economics, Elsevier, vol. 27(4-5), pages 443-474, August. [Downloadable!] (restricted)
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  6. James D. Adams & Adam B. Jaffe, 1996. "Bounding the Effects of R&D: An Investigation Using Matched Establishment-Firm Data," RAND Journal of Economics, The RAND Corporation, vol. 27(4), pages 700-721, Winter. [Downloadable!] (restricted)
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  7. Beardsell, Mark & Henderson, Vernon, 1999. "Spatial evolution of the computer industry in the USA," European Economic Review, Elsevier, vol. 43(2), pages 431-456, February. [Downloadable!] (restricted)
  8. Sveikauskas, Leo A, 1975. "The Productivity of Cities," The Quarterly Journal of Economics, MIT Press, vol. 89(3), pages 393-413, August. [Downloadable!] (restricted)
  9. Roberts, Mark J & Tybout, James R, 1997. "The Decision to Export in Colombia: An Empirical Model of Entry with Sunk Costs," American Economic Review, American Economic Association, vol. 87(4), pages 545-64, September. [Downloadable!] (restricted)
  10. Jaffe, Adam B & Trajtenberg, Manuel & Henderson, Rebecca, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 577-98, August. [Downloadable!] (restricted)
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  11. Duncan Black & Vernon Henderson, 1999. "A Theory of Urban Growth," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 252-284, April. [Downloadable!] (restricted)
  12. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 377-393, 01. [Downloadable!] (restricted)
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  13. Moulton, Brent R., 1986. "Random group effects and the precision of regression estimates," Journal of Econometrics, Elsevier, vol. 32(3), pages 385-397, August. [Downloadable!] (restricted)
  14. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December. [Downloadable!] (restricted)
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    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  15. Arthur, W. Brian, 1990. "'Silicon Valley' locational clusters: when do increasing returns imply monopoly?," Mathematical Social Sciences, Elsevier, vol. 19(3), pages 235-251, June. [Downloadable!] (restricted)
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  17. Henderson, Vernon & Kuncoro, Ari & Turner, Matt, 1995. "Industrial Development in Cities," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1067-90, October. [Downloadable!] (restricted)
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  18. Jess Gaspar & Edward Glaeser, 1996. "Information Technology and the Future of Cities," NBER Working Papers 5562, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  19. Robert E. Lucas Jr., 1978. "On the Size Distribution of Business Firms," Bell Journal of Economics, The RAND Corporation, vol. 9(2), pages 508-523, Autumn. [Downloadable!] (restricted)
  20. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June. [Downloadable!] (restricted)
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  21. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
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  22. Thomas J. Holmes, 1998. "The Effect of State Policies on the Location of Manufacturing: Evidence from State Borders," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 667-705, August. [Downloadable!] (restricted)
  23. Venables, Anthony J, 1996. "Equilibrium Locations of Vertically Linked Industries," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(2), pages 341-59, May.
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  24. Steven J. Davis & John C. Haltiwanger & Scott Schuh, 1998. "Job Creation and Destruction," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262540932.
  25. Randy A. Becker & J. Vernon Henderson, 1999. "Costs of Air Quality Regulation," NBER Working Papers 7308, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  26. Lucas, Robert Jr., 1988. "On the mechanics of economic development," Journal of Monetary Economics, Elsevier, vol. 22(1), pages 3-42, July. [Downloadable!] (restricted)
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