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

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Christopher H. Wheeler

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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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Paper provided by Federal Reserve Bank of St. Louis in its series Working Papers with number 2004-024.

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Date of creation: 2004
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Handle: RePEc:fip:fedlwp:2004-024

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Keywords: Industrial productivity Regional economics

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  6. repec:fth:prinin:338 is not listed on IDEAS
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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. Christopher H. Wheeler, 2005. "Do localization economies derive from human capital externalities?," Working Papers 2005-015, Federal Reserve Bank of St. Louis. [Downloadable!]
    Other versions:
  2. Christopher H. Wheeler, 2005. "Technology and industrial agglomeration: evidence from computer usage," Working Papers 2005-016, Federal Reserve Bank of St. Louis. [Downloadable!]
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