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What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns

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Author Info
Glenn Ellison () (Masachusetts Institute of Technology, Department of Economics and NBER)
Edward L. Glaeser () (Harvard University, John F. Kennedy School of Government; Faculty of Arts and Sciences and NBER)
William R. Kerr () (Harvard Business School, Entrepreneurial Management Unit)

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Abstract

Many industries are geographically concentrated. Many mechanisms that could account for such agglomeration have been proposed. We note that these theories make different predictions about which pairs of industries should be coagglomerated. We discuss the measurement of coagglomeration and use data from the Census Bureau’s Longitudinal Research Database from 1972 to 1997 to compute pairwise coagglomeration measurements for U.S. manufacturing industries. Industry attributes are used to construct measures of the relevance of each of Marshall’s three theories of industry agglomeration to each industry pair: (1) agglomeration saves transport costs by proximity to input suppliers or final consumers, (2) agglomeration allows for labor market pooling, and (3) agglomeration facilitates intellectual spillovers. We assess the importance of the theories via regressions of coagglomeration indices on these measures. Data on characteristics of corresponding industries in the United Kingdom are used as instruments. We find evidence to support each mechanism. Our results suggest that input-output dependencies are the most important factor, followed by labor pooling.

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Paper provided by Harvard Business School in its series Working Papers with number 07-064.

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Length: 43 pages
Date of creation: Apr 2007
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Handle: RePEc:hbs:wpaper:07-064

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  5. Edward L. Glaeser & Janet E. Kohlhase, 2003. "Cities, Regions and the Decline of Transport Costs," NBER Working Papers 9886, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  8. Glenn Ellison & Edward L. Glaeser, 1994. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," NBER Working Papers 4840, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  18. Keith Maskus & Catherine Sveikauskas & Allan Webster, 1994. "The composition of the human capital stock and its relation to international trade: Evidence from the US and Britain," Review of World Economics (Weltwirtschaftliches Archiv), Springer, vol. 127(1), pages 50-76, March. [Downloadable!] (restricted)
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  20. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Journal of Economics, Springer, vol. 83(1), pages 197-228, October. [Downloadable!] (restricted)
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(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. Stephane Straub, 2008. "Infrastructure and Growth in Developing Countries: Recent Advances and Research Challenges," ESE Discussion Papers 179, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  2. Shihe Fu & Stephen L. Ross, 2007. "Wage Premia in Employment Clusters: Agglomeration Economies or Worker Heterogeneity?," Working papers 2007-26, University of Connecticut, Department of Economics, revised Dec 2007. [Downloadable!]
  3. William Kerr & Ramana Nanda, 2006. "Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship," Working Papers 07-033, Harvard Business School, revised Dec 2007. [Downloadable!]
    Other versions:
  4. Edward L. Glaeser, 2007. "Entrepreneurship and the City," NBER Working Papers 13551, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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