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Agglomeration Economies within IT-Producing and IT-Consuming Industries in U.S. Regions

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Author Info
Simon Condliffe () (Department of Economics,West Chester University of Pennsylvania)
William Latham () (Department of Economics,University of Delaware)
Christian Le Bas () (Department of Economics,University of Lyon)
Frédéric Miribel

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Abstract

This paper deals with the effects of the geographic concentration of economic activity on productivity through agglomeration economies in the U.S. economy. Our empirical study extends the literature on agglomeration economies in two directions. First we measure and compare the effects on productivity of geographic concentration in either information technology related activity (the IT sector) or in all other economic activities (the non-IT sector). Second we follow Jorgenson’s (2002) reasoning regarding the significance of the differences between IT-producing sectors and IT-using sectors and assess the differential effects of concentration in IT-producing sectors and concentration in IT-using sectors on productivity. We utilize four measures of agglomeration and analyze effects at two levels of geographic disaggregation: U.S. states and U.S. counties. We perform the analysis using a model drawn from the growth accounting literature in which total labor productivity in a region is the dependent variable. It is modeled as a function of the region’s capital-output ratio, the quality of the region’s labor supply as measured by the level of education, and an agglomeration variable measured by concentration in the IT or non-IT sectors or in the IT-producing or IT-using sectors. The cross section estimates for a single year yield mixed results. We find weak evidence in favor of an effect of concentration of IT activity on productivity at the state level. We find stronger effects on productivity at the county level from concentration in IT-producing sectors.

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Paper provided by University of Delaware, Department of Economics in its series Working Papers with number 08-24.

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Length: 30 pages
Date of creation: 2008
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Handle: RePEc:dlw:wpaper:08-24.

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Related research
Keywords: Agglomeration Economies; Information Technology; Productivity;

Find related papers by JEL classification:
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
O33 - Economic Development, Technological Change, and Growth - - Technological Change - - - Technological Change: Choices and Consequences; Diffusion Processes
D24 - Microeconomics - - Production and Organizations - - - Production; Capital and Total Factor Productivity; Capacity
D62 - Microeconomics - - Welfare Economics - - - Externalities

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    Other versions:
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  10. Dominique Foray, 2006. "The Economics of Knowledge," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262562235.
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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)
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  14. Mirko Draca & Raffaella Sadun & John Van Reenen, 2006. "Productivity and ICT: A Review of the Evidence," CEP Discussion Papers dp0749, Centre for Economic Performance, LSE. [Downloadable!]
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