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A Flexible Test for Agglomeration Economies in Two U.S. Manufacturing Industries

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Author Info
Edward Feser
Abstract

This paper uses the inverse input demand function framework of Kim (1992) to test for economies of industry and urban size in two U.S. manufacturing sectors of differing technology intensity: farm and garden machinery (SIC 352) and measuring and controlling devices (SIC 382). The inverse input demand framework permits the estimation of the production function jointly with a set of cost shares without the imposition of prior economic restrictions. Tests using plant-level data suggest the presence of population scale (urbanization) economies in the moderate- to low-technology farm and garden machinery sector and industry scale (localization) economies in the higher technology measuring and controlling devices sector. The efficiency and generality of the inverse input demand approach are particularly appropriate for micro-level studies of agglomeration economies where prior assumptions regarding homogeneity and homotheticity are less appropriate.

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File URL: http://webserver01.ces.census.gov/index.php/ces/1.00/cespapers?down_key=101701
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Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 04-14.

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Length: 32 pages
Date of creation: Aug 2004
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Handle: RePEc:cen:wpaper:04-14

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Web page: http://www.ces.census.gov

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  1. 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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  2. Sveikauskas, Leo A, 1975. "The Productivity of Cities," The Quarterly Journal of Economics, MIT Press, vol. 89(3), pages 393-413, August. [Downloadable!] (restricted)
  3. Aivazian, Varouj A, et al, 1987. "Economies of Scale versus Technological Change in the Natural Gas Transmission Industry," The Review of Economics and Statistics, MIT Press, vol. 69(3), pages 556-61, August. [Downloadable!] (restricted)
  4. Moomaw, Ronald L., 1985. "Firm location and city size: Reduced productivity advantages as a factor in the decline of manufacturing in urban areas," Journal of Urban Economics, Elsevier, vol. 17(1), pages 73-89, January. [Downloadable!] (restricted)
  5. Henderson, J. Vernon, 1986. "Efficiency of resource usage and city size," Journal of Urban Economics, Elsevier, vol. 19(1), pages 47-70, January. [Downloadable!] (restricted)
  6. Byong-Hyong Bahk & Michael Gort & Richard A Wall, 1991. "Decomposing Technical Change," Working Papers 91-4, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
  7. Mountain, Dean C, 1986. "Economies of Scale versus Technological Change: An Aggregate Production Function for Switzerland," The Review of Economics and Statistics, MIT Press, vol. 68(4), pages 707-11, November. [Downloadable!] (restricted)
  8. Chan, M W Luke & Mountain, Dean C, 1983. "Economies of Scale and the Tornqvist Discrete Measure of Productivity Growth," The Review of Economics and Statistics, MIT Press, vol. 65(4), pages 663-67, November. [Downloadable!] (restricted)
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  10. Sang V Nguyen & Edward C Kokkelenberg, 1988. "Modelling Technical Progress And Total Factor Productivity: A Plant Level Example," Working Papers 88-4, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
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