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Varieties of agglomeration: Disentangling horizontal and vertical agglomeration within the manufacturing sector in the United States

Author

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  • Kalathil, Nikhil
  • Lanahan, Lauren
  • Feldman, Maryann
  • Fuchs, Erica R.H

Abstract

We decompose regional agglomerations into two components that differentiate between horizontal (co-location with peer industries) and vertical (co-location with suppliers) agglomeration. Using employment and establishment data at the US county level and the six-digit industry level, we demonstrate that manufacturing industries and regions that would otherwise look similar, in fact vary in their degree of vertical and horizontal agglomeration. Industries with a higher contribution of manufactured goods to overall inputs' value are correlated with vertical agglomeration, while more R&D intensive industries are correlated with horizontal agglomeration. Using the semiconductor industry as an illustrative example, we document how heterogeneity in industry-county rates of vertical and horizontal agglomeration reflects differences in the products manufactured. These industry-level and within-industry differences are under-observed and sometimes obfuscated by existing agglomeration measures. We conclude with a theoretical framework for regional and industrial policy interventions.

Suggested Citation

  • Kalathil, Nikhil & Lanahan, Lauren & Feldman, Maryann & Fuchs, Erica R.H, 2025. "Varieties of agglomeration: Disentangling horizontal and vertical agglomeration within the manufacturing sector in the United States," Research Policy, Elsevier, vol. 54(7).
    • Handle: RePEc:eee:respol:v:54:y:2025:i:7:s0048733325001015
    DOI: 10.1016/j.respol.2025.105272
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    JEL classification:

    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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