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Industrial Development in Cities

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  • J. Vernon Henderson
  • Ari Kuncoro
  • Matthew Turner

Abstract

Using extensive data on 1970 and 1987 urban characteristics, the paper analyzes changes in employment in specific manufacturing industries in cities between 1970 and 1987. Two sets of questions are the focus. First, what present or past characteristics of a city's economic environment are critical in determining current employment levels in different industries? How much persistence in employment patterns is there over time and what is the source of that persistence? The second set of questions explores what inferences can be made from the data and results concerning the nature of externalities in urban markets, involving diversity of suppliers to firms, information spillovers concerning current market conditions and information spillovers involving the spread of technology. While the literature assumes employment levels in individual industries in individual cities show strong mean reversion ("convergence"), in fact that is not the case in the 1970-87 time period. The raw data show strong persistence. The major source of that persistence appears to be persistence in local demand conditions (i.e., persistence in regional comparative advantage), as opposed to other measured or unmeasured urban characteristics. Retention of employment is also strongly helped by the historical degree of local specialization in the industry, perhaps indicating a form of dynamic externality. Other historical conditions are not important.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 4178.

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Date of creation: Oct 1992
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Publication status: published as Journal of Political Economy, 1995, 103, pp.1067-1090.
Handle: RePEc:nbr:nberwo:4178

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  1. Barro, Robert J & Sala-i-Martin, Xavier, 1992. "Convergence," Journal of Political Economy, University of Chicago Press, vol. 100(2), pages 223-51, April.
  2. Romer, Paul M, 1986. "Increasing Returns and Long-run Growth," Journal of Political Economy, University of Chicago Press, vol. 94(5), pages 1002-37, October.
  3. Robert J. Barro & Xavier Sala-i-Martin, 1991. "Convergence across States and Regions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 22(1), pages 107-182.
  4. Davis, Steven J & Haltiwanger, John C, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, MIT Press, vol. 107(3), pages 819-63, August.
  5. Beeson, Patricia E & Eberts, Randall W, 1989. "Identifying Productivity and Amenity Effects in Interurban Wage Differentials," The Review of Economics and Statistics, MIT Press, vol. 71(3), pages 443-52, August.
  6. Dixit, Avinash K & Stiglitz, Joseph E, 1975. "Monopolistic Competition and Optimum Product Diversity," The Warwick Economics Research Paper Series (TWERPS) 64, University of Warwick, Department of Economics.
  7. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-52, December.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
  8. Dunne, Timothy & Roberts, Mark J & Samuelson, Larry, 1989. "Plant Turnover and Gross Employment Flows in the U.S. Manufacturing Sector," Journal of Labor Economics, University of Chicago Press, vol. 7(1), pages 48-71, January.
  9. Abdel-Rahman, H. M., 1988. "Product differentiation, monopolistic competition and city size," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 69-86, February.
  10. Olivier Jean Blanchard & Lawrence F. Katz, 1992. "Regional Evolutions," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 23(1), pages 1-76.
  11. Bergsman, Joel & Greenston, Peter & Healy, Robert, 1975. "A classification of economic activities based on location patterns," Journal of Urban Economics, Elsevier, vol. 2(1), pages 1-28, January.
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