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Spatial Growth and Industry Age

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Author Info
Klaus Desmet
Esteban Rossi-Hansberg

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Abstract

U.S. county data for the last 20 or 30 years show that manufacturing employment has been deconcentrating. In contrast, the service sector exhibits concentration in counties with intermediate levels of employment. This paper presents a theory where local sectoral growth is driven by technological diffusion across space. The age of an industry -- measured as the time elapsed since the last major general purpose technology innovation in the sector -- determines the pattern of scale dependence in growth rates. Young industries exhibit non-monotone relationships between employment levels and growth rates, while old industries experience negative scale dependence in growth rates. The model then predicts that the relationship between county employment growth rates and county employment levels in manufacturing at the turn of the 20th century should be similar to the same relationship in services in the last 20 years. We provide evidence consistent with this prediction.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 13302.

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Date of creation: Aug 2007
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Handle: RePEc:nbr:nberwo:13302

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Find related papers by JEL classification:
E2 - Macroeconomics and Monetary Economics - - Macroeconomics: Consumption, Saving, Production, Employment, and Investment
O3 - Economic Development, Technological Change, and Growth - - Technological Change
O4 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity
R1 - Urban, Rural, and Regional Economics - - General Regional Economics

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  2. Bresnahan, Timothy F. & Trajtenberg, M., 1995. "General purpose technologies 'Engines of growth'?," Journal of Econometrics, Elsevier, vol. 65(1), pages 83-108, January. [Downloadable!] (restricted)
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  5. Esteban Rossi-Hansberg, 2005. "A Spatial Theory of Trade," American Economic Review, American Economic Association, vol. 95(5), pages 1464-1491, December. [Downloadable!]
  6. Francisco J. Buera & Joseph P. Kaboski, 2006. "The Rise of the Service Economy," 2006 Meeting Papers 496, Society for Economic Dynamics.
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  16. Robert E. Lucas & Esteban Rossi-Hansberg, 2002. "On the Internal Structure of Cities," Econometrica, Econometric Society, vol. 70(4), pages 1445-1476, July. [Downloadable!] (restricted)
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Cited by:
(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. R. Jason Faberman, 2007. "The relationship between the establishment age distribution and urban growth," Working Papers 07-18, Federal Reserve Bank of Philadelphia. [Downloadable!]
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