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Agglomeration economies with consistent productivity estimates

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  • Ehrl, Philipp

Abstract

This paper investigates the relative impact of microeconomic agglomeration mechanisms on plant's total factor productivity (TFP) using German establishment and employment-level data. Contrasting different strategies for estimating TFP from plant-level production functions reveals that unobserved output prices bias true productivity and lead to underestimated agglomeration economies. With the corrected TFP measure, the largest impact is found for labor market pooling, which is captured by the correlation of the occupational composition between one county-industry and the rest of the county. This main result is robust, even when the spatial units are resized from counties to larger labor market regions. Input linkages appear to be relevant only at this larger regional scale. Overall, agglomeration economies differ substantially across industries. Only for a subset of industries, some positive evidence is detected for knowledge spillovers.

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Article provided by Elsevier in its journal Regional Science and Urban Economics.

Volume (Year): 43 (2013)
Issue (Month): 5 ()
Pages: 751-763

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Handle: RePEc:eee:regeco:v:43:y:2013:i:5:p:751-763
Contact details of provider: Web page: http://www.elsevier.com/locate/regec

Keywords: Agglomeration economies; Modifiable areal unit problem; TFP estimation; Price bias;

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Find related papers by JEL classification:
  • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
  • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
  • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General

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Cited by:

  1. Jan Kluge & Robert Lehmann, 2013. "Marshall or Jacobs? New insights from an interaction model," Jahrbuch für Regionalwissenschaft, Springer, vol. 33(2), pages 107-133, October.
  2. Combes, Pierre-Philippe & Gobillon, Laurent, 2014. "The Empirics of Agglomeration Economies," IZA Discussion Papers 8508, Institute for the Study of Labor (IZA).
  3. Pierre-Philippe Combes & Laurent Gobillon, 2014. "The Empirics of Agglomeration Economies," PSE Working Papers halshs-01071761, HAL.

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