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What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns

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Glenn Ellison
Edward L. Glaeser
William Kerr

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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 National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13068.

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Date of creation: Apr 2007
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Handle: RePEc:nbr:nberwo:13068

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A1 - General Economics and Teaching - - General Economics

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References listed on IDEAS
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.:
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Full references

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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. Machikita, Tomohiro & Ueki, Yasushi, 2009. "Linked versus Non-linked Firms in Innovation: The Effects of Economies of Network in Agglomeration in East Asia," IDE Discussion Papers 188, Institute of Developing Economies, Japan External Trade Organization(JETRO). [Downloadable!]
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  3. Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2008. "Spatial Concentration and Firm-Level Productivity in France," CEPR Discussion Papers 6858, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  4. 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!]
  5. Stephen Redding, 2009. "The Empirics of New Economic Geography," CEP Discussion Papers dp0925, Centre for Economic Performance, LSE. [Downloadable!]
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  6. Thomas J. Holmes & Sanghoon Lee, 2009. "Economies of Density versus Natural Advantage: Crop Choice on the Back Forty," NBER Working Papers 14704, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  7. Pierre M. Picard & David E. Wildasin, 2009. "Labor Market Pooling, Outsourcing and Labor Contracts," CESifo Working Paper Series CESifo Working Paper No. , CESifo Group Munich. [Downloadable!]
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  8. Edward L. Glaeser & William R. Kerr, 2008. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Harvard Business School Working Papers 09-055, Harvard Business School. [Downloadable!]
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  9. Richard Harris & Victoria Kravtsova, 2009. "In Search of W," SERC Discussion Papers 0017, Spatial Economics Research Centre, LSE. [Downloadable!]
  10. Stephen Redding, 2009. "Economic Geography: A Review of the Theoretical and Empirical Literature," CEP Discussion Papers dp0904, Centre for Economic Performance, LSE. [Downloadable!]
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  11. William Kerr & Ramana Nanda, 2006. "Democratizing Entry: Banking Deregulations, Financing Constraints, and Entrepreneurship," Harvard Business School Working Papers 07-033, Harvard Business School, revised Oct 2008. [Downloadable!]
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  12. Giovanni Facchini & Anna Maria Mayda & Prachi Mishra, 2009. "Do Interest Groups affect US Immigration Policy?," CReAM Discussion Paper Series 0904, Centre for Research and Analysis of Migration (CReAM), Department of Economics, University College London. [Downloadable!]
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  13. Jaenicke, Edward C. & Goetz, Stephan J. & Wu, Ping-Chao & Dimitri, Carolyn, 2009. "Identifying and Measuring the Effect of Firm Clusters Among Certified Organic Processors and Handlers," 2009 Annual Meeting, July 26-28, 2009, Milwaukee, Wisconsin 49205, Agricultural and Applied Economics Association. [Downloadable!]
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  15. Matthias Wrede, 2009. "Heterogenous Skills and Homogeneous Land: Segmentation and Agglomeration," MAGKS Papers on Economics 200922, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung). [Downloadable!]
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  17. William R. Kerr & William F. Lincoln, 2008. "The Supply Side of Innovation: H-1B Visa Reforms and US Ethnic Invention," Harvard Business School Working Papers 09-005, Harvard Business School. [Downloadable!]
  18. Daniel F. Heuermann, 2009. "Reinventing the Skilled Region: Human Capital Externalities and Industrial Change," Discussion Papers 200902, Institute of Labour Law and Industrial Relations in the European Community (IAAEG). [Downloadable!]
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