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Productivity and the density of economic activity

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  • Antonio Ciccone

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  • Robert E. Hall

Abstract

To explain the large differences in labor productivity across U.S. states, the authors estimate two models--one based on local geographical externalities and the other on the diversity of local intermediate services--where spatial density results in aggregate increasing returns. Both models lead to a relation between county employment density and productivity at the state level. Using data on gross state output, the authors find that a doubling of employment density increases average labor productivity by around 6 percent. More than half of the variance of output per worker across states can be explained by differences in the density of economic activity. Copyright 1996 by American Economic Association.

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Bibliographic Info

Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 120.

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Date of creation: May 1995
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Handle: RePEc:upf:upfgen:120

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  1. Teresa Garcia-MilĂ  & Therese J. McGuire & Robert H. Porter, 1993. "The effect of public capital in state-level production functions reconsidered," Economics Working Papers, Department of Economics and Business, Universitat Pompeu Fabra 36, Department of Economics and Business, Universitat Pompeu Fabra.
  2. Spence, Michael, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 43(2), pages 217-35, June.
  3. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Working Papers 4085, National Bureau of Economic Research, Inc.
  4. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  5. Sveikauskas, Leo A, 1975. "The Productivity of Cities," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 89(3), pages 393-413, August.
  6. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, American Economic Association, vol. 64(4), pages 640-56, September.
  7. J. Vernon Henderson, 1994. "Externalities and Industrial Development," NBER Working Papers 4730, National Bureau of Economic Research, Inc.
  8. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, American Economic Association, vol. 67(3), pages 297-308, June.
  9. 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.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  10. Rivera-Batiz, Francisco L., 1988. "Increasing returns, monopolistic competition, and agglomeration economies in consumption and production," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 18(1), pages 125-153, February.
  11. Gerald A. Carlino & Richard Voith, 1989. "Accounting for differences in aggregate state productivity," Working Papers 90-1, Federal Reserve Bank of Philadelphia.
  12. Henderson, J. Vernon, 1986. "Efficiency of resource usage and city size," Journal of Urban Economics, Elsevier, vol. 19(1), pages 47-70, January.
  13. Ciccone, Antonio & Hall, Robert E, 1996. "Productivity and the Density of Economic Activity," American Economic Review, American Economic Association, American Economic Association, vol. 86(1), pages 54-70, March.
  14. Moomaw, Ronald L., 1985. "Firm location and city size: Reduced productivity advantages as a factor in the decline of manufacturing in urban areas," Journal of Urban Economics, Elsevier, vol. 17(1), pages 73-89, January.
  15. Abdel-Rahman, H. M., 1988. "Product differentiation, monopolistic competition and city size," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 18(1), pages 69-86, February.
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