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A quantitative assessment of the role of agglomeration economies in the spatial concentration of U.S. employment

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  • Satyajit Chatterjee

Abstract

This paper seeks to quantify the contribution of agglomeration economies to the spatial concentration of U.S. employment. A spatial macroeconomic model with heterogeneous localities and agglomeration economies is developed and calibrated to U.S. data on the spatial distribution of employment. The model is used to answer the question: By how much would the spatial concentration of employment decline if agglomeration economies were counterfactually suppressed? For the most plausible calibration, the answer is about 48 percent. More generally, the general equilibrium contribution of agglomeration economies appears to be substantial, with empirically defensible calibrations yielding estimates between 40 and 60 percent.

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Bibliographic Info

Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 06-20.

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Date of creation: 2006
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Handle: RePEc:fip:fedpwp:06-20

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Keywords: Employment;

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References

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  1. Douglas Gollin, 2002. "Getting Income Shares Right," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 458-474, April.
  2. Jordan Rappaport, 2006. "A productivity model of city crowdedness," Research Working Paper RWP 06-06, Federal Reserve Bank of Kansas City.
  3. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
  4. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-99, June.
  5. Antonio Ciccone & Robert E. Hall, 1996. "Productivity and the Density of Economic Activity," NBER Working Papers 4313, National Bureau of Economic Research, Inc.
  6. Gerald Carlino & Satyajit Chatterjee, 2002. "Employment Deconcentration: A New Perspective on America's Postwar Urban Evolution," Journal of Regional Science, Wiley Blackwell, vol. 42(3), pages 445-475.
  7. Chatterjee, Satyajit & Carlino, Gerald A., 2001. "Aggregate metropolitan employment growth and the deconcentration of metropolitan employment," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 549-583, December.
  8. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  9. Edward L. Glaeser & Glenn Ellison, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," American Economic Review, American Economic Association, vol. 89(2), pages 311-316, May.
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Cited by:
  1. Wouter Vermeulen, 2011. "Agglomeration Externalities and Urban Growth Controls," SERC Discussion Papers 0093, Spatial Economics Research Centre, LSE.
  2. Niels Vermeer & Wouter Vermeulen, 2012. "External Benefits of Brownfield Redevelopment: An Applied Urban General Equilbirum Analysis," SERC Discussion Papers 0099, Spatial Economics Research Centre, LSE.
  3. Wouter Vermeulen, 2011. "Agglomeration Externalities and Urban Growth Controls," CPB Discussion Paper 191, CPB Netherlands Bureau for Economic Policy Analysis.
  4. Niels Vermeer & Wouter Vermeulen, 2011. "External Benefits of Brownfield Redevelopment: An Applied Urban General Equilibrium Analysis," CPB Discussion Paper 178, CPB Netherlands Bureau for Economic Policy Analysis.

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