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Productivity and the Density of Economic Activity

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  • Ciccone, Antonio
  • Hall, Robert E

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.

Suggested Citation

  • 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.
    • Handle: RePEc:aea:aecrev:v:86:y:1996:i:1:p:54-70
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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.
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    More about this item

    JEL classification:

    • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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