Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach
Scale economies and agglomeration externalities are alleged to be important determinants of economic growth. To assess these effects, the authors outline and estimate a microfoundations model based on a dynamic cost function specification. This model provides for the separate identification of the impacts of externalities and cyclical utilization on short- and long-run scale economies and input substitution patterns. The authors find that scale economies are prevalent in U.S manufacturing; cost savings and scale effects often attributed to internal inputs may be due to external factors; and supply-side agglomeration effects are greater than demand-side, especially in the long run.
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Volume (Year): 89 (1999)
Issue (Month): 1 (March)
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93-22, Michigan - Center for Research on Economic & Social Theory.
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