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Agglomeration Elasticities in New Zealand

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Author Info
David C. Maré () (Motu Economic and Public Policy Research)
Daniel J. Graham () (Centre for Transport Studies, Imperial College, London)

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Abstract

This paper analyses the relationship between firms’ multi-factor productivity and the effective employment density of the areas where they operate. Quantifying these agglomeration elasticities is of central importance in the evaluation of the wider economic benefits of transport investments. We estimate agglomeration elasticities using the Statistics New Zealand prototype Longitudinal Business Database: a firm-level panel covering the period 1999 to 2006. We estimate that an area with 10 percent higher effective density has firms with productivity that is 0.69 percent higher, once we control for the industry specific production functions and sorting of more productive firms across industries and locations. We present separate estimates of agglomeration elasticities for specific industries and regions, and examine the interaction of agglomeration with capital, labour, and other inputs.

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File URL: http://motu-www.motu.org.nz/wpapers/09_06.pdf
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Publisher Info
Paper provided by Motu Economic and Public Policy Research in its series Working Papers with number 09_06.

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Length: 43 pages
Date of creation: Jun 2009
Date of revision:
Handle: RePEc:mtu:wpaper:09_06

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Web page: http://www.motu.org.nz
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Related research
Keywords: Agglomeration; urban density; transport evaluation; productivity;

Find related papers by JEL classification:
L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
R3 - Urban, Rural, and Regional Economics - - Production Analysis and Firm Location
R40 - Urban, Rural, and Regional Economics - - Transportation Systems - - - General

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References listed on IDEAS
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  1. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, vol. 86(1), pages 54-70, March. [Downloadable!] (restricted)
    Other versions:
  2. Anthony J. Venables, 2007. "Evaluating Urban Transport Improvements: Cost-Benefit Analysis in the Presence of Agglomeration and Income Taxation," Journal of Transport Economics and Policy, London School of Economics and University of Bath, vol. 41(2), pages 173-188, May. [Downloadable!] (restricted)
    Other versions:
  3. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Blackwell Publishing, vol. 70(2), pages 317-341, 04. [Downloadable!] (restricted)
    Other versions:
  4. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117 Elsevier. [Downloadable!] (restricted)
    Other versions:
  5. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-97, November. [Downloadable!] (restricted)
  6. Melo, Patricia C. & Graham, Daniel J. & Noland, Robert B., 2009. "A meta-analysis of estimates of urban agglomeration economies," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 332-342, May. [Downloadable!] (restricted)
  7. Eberts, Randall W. & McMillen, Daniel P., 1999. "Agglomeration economies and urban public infrastructure," Handbook of Regional and Urban Economics, in: P. C. Cheshire & E. S. Mills (ed.), Handbook of Regional and Urban Economics, edition 1, volume 3, chapter 38, pages 1455-1495 Elsevier. [Downloadable!] (restricted)
  8. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171 Elsevier. [Downloadable!] (restricted)
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