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Productivity and the geographic concentration of industry: The role of plant scale

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  • Wheeler, Christopher H.

Abstract

A large body of research has established a positive connection between an industry's productivity and the magnitude of its presence within locally defined geographic areas. This paper examines the extent to which this relationship can be explained by a micro-level underpinning commonly associated with productivity: establishment scale. Looking at data on two-digit manufacturing across a sample of U.S. metropolitan areas, I find two primary results. First, average plant size - defined in terms of numbers of workers - increases substantially as an industry's employment in a metropolitan area rises. Second, results from a decomposition of localization effects on labor earnings into plant-size and plant-count components reveal that the widely observed, positive association between a worker's wage and the total employment in his or her own metropolitan area-industry derives predominantly from the former, not the latter. Localization economies, therefore, appear to be the product of plant-level organization rather than pure population effects.
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  • Wheeler, Christopher H., 2006. "Productivity and the geographic concentration of industry: The role of plant scale," Regional Science and Urban Economics, Elsevier, vol. 36(3), pages 313-330, May.
    • Handle: RePEc:eee:regeco:v:36:y:2006:i:3:p:313-330
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    1. Christopher Wheeler, 2007. "Do localization economies derive from human capital externalities?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 41(1), pages 31-50, March.
    2. J. Knoben, 2009. "Localized inter-organizational linkages, agglomeration effects, and the innovative performance of firms," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 43(3), pages 757-779, September.
    3. Christopher H. Wheeler, 2009. "Technology and industrial agglomeration: Evidence from computer usage," Papers in Regional Science, Wiley Blackwell, vol. 88(1), pages 43-62, March.
    4. Wheeler, Christopher H., 2006. "Productivity and the geographic concentration of industry: The role of plant scale," Regional Science and Urban Economics, Elsevier, vol. 36(3), pages 313-330, May.
    5. Haiwen Zhou, 2022. "The Choice of Technology and Economic Geography," International Economic Journal, Taylor & Francis Journals, vol. 36(1), pages 1-18, January.
    6. Jun Koo & Jongmin Choi, 2013. "The rise of the biomedical cluster in Wonju, Korea," Chapters, in: Sören Eriksson (ed.), Clusters and Economic Growth in Asia, chapter 4, pages 66-84, Edward Elgar Publishing.
    7. Elif Alkay & Geoffrey Hewings, 2012. "The determinants of agglomeration for the manufacturing sector in the Istanbul metropolitan area," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 48(1), pages 225-245, February.
    8. Christopher W. Anderson & Eli Beracha, 2008. "Robustness Of The Headquarters‐City Effect On Stock Returns," Journal of Financial Research, Southern Finance Association;Southwestern Finance Association, vol. 31(3), pages 271-300, September.
    9. Alan Manning, 2008. "The Plant Size-Place Effect: Agglomeration and Monopsony in Labour Markets," Working Papers 1109, Princeton University, Department of Economics, Industrial Relations Section..
    10. Decker, Christopher S. & Thompson, Eric C. & Wohar, Mark E., 2009. "Determinants of State Labor Productivity: The Changing Role of Density," Journal of Regional Analysis and Policy, Mid-Continent Regional Science Association, vol. 39(01), pages 1-10.
    11. Alejandra Trejo, 2011. "Competitiveness And The Regional Efficiency Of The Mexican Service Sector," ERSA conference papers ersa10p196, European Regional Science Association.
    12. Shihe Fu & Junjie Hong, 2011. "Testing Urbanization Economies In Manufacturing Industries: Urban Diversity Or Urban Size?," Journal of Regional Science, Wiley Blackwell, vol. 51(3), pages 585-603, August.
    13. Abdullah M. Khan, 2012. "Impact of globalization on productivity of u.s. Manufacturing labor 1988-2003," International Journal of Business and Social Research, MIR Center for Socio-Economic Research, vol. 2(5), pages 203-218, October.
    14. J. Reid Cummings & Donald R. Epley, 2014. "A Total Requirements View of a Tourism and Hospitality Market is More Accurate Than Traditional Location Quotients," Tourism Economics, , vol. 20(3), pages 473-492, June.
    15. Abdullah M. Khan, 2012. "Impact of globalization on productivity of u.s. Manufacturing labor 1988-2003," International Journal of Business and Social Research, LAR Center Press, vol. 2(5), pages 203-218, October.
    16. Figueiredo, Octávio & Guimarães, Paulo & Woodward, Douglas, 2010. "Vertical disintegration in Marshallian industrial districts," Regional Science and Urban Economics, Elsevier, vol. 40(1), pages 73-78, January.
    17. Alan Manning, 2010. "The plant size-place effect: agglomeration and monopsony in labour markets," Journal of Economic Geography, Oxford University Press, vol. 10(5), pages 717-744, September.
    18. Zhuqing Yang & Yuanyuan Zhu & Yulin Zhang, 2022. "Does urban shrinkage lower labor productivity? The role of spatial expansion," Regional Science Policy & Practice, Wiley Blackwell, vol. 14(S2), pages 106-117, November.
    19. Joshua Drucker, 2009. "Trends in Regional Industrial Concentration in the United States," Working Papers 09-06, Center for Economic Studies, U.S. Census Bureau.

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