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

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  • Christopher H. Wheeler

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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Citations

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Cited by:
  1. Christopher H. Wheeler, 2005. "Do localization economies derive from human capital externalities?," Working Papers 2005-015, Federal Reserve Bank of St. Louis.
  2. 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.
  3. 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.
  4. Alejandra Trejo, 2011. "Competitiveness And The Regional Efficiency Of The Mexican Service Sector," ERSA conference papers ersa10p196, European Regional Science Association.
  5. Shihe Fu & Junjie Hong, 2011. "Testing Urbanization Economies In Manufacturing Industries: Urban Diversity Or Urban Size?," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 585-603, 08.
  6. 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).
  7. 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.
  8. Joshua Drucker, 2009. "Trends in Regional Industrial Concentration in the United States," Working Papers 09-06, Center for Economic Studies, U.S. Census Bureau.
  9. 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.
  10. 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.

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