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Agglomeration, Enterprise Size, and Productivity

  • Edward Feser
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    Much research on agglomeration economies, and particularly recent work that builds on Marshall’s concept of the industrial district, postulates that benefits derived from proximity between businesses are strongest for small enterprises (Humphrey 1995, Sweeney and Feser 1998). With internal economies a function of the shape of the average cost curve and level of production, and external economies in shifts of that curve, a small firm enjoying external economies characteristic of industrial districts (or complexes or simply urbanized areas) may face the same average costs as the larger firm producing a higher volume of output (Oughton and Whittam 1997; Carlsson 1996; Humphrey 1995). Thus we observe the seeming paradox of large firms that enjoy internal economies of scale co-existing with smaller enterprises that should, by all accounts, be operating below minimum efficient scale. With the Birch-inspired debate on the relative job- and innovation-generating capacity of small and large firms abating (Ettlinger 1997), research on the small firm sector has shifted to an examination of the business strategies and sources of competitiveness of small enterprises (e.g., Pratten 1991, Nooteboom 1993). Technological external scale economies are a key feature of this research (Oughton and Whittam 1997).

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    File URL: ftp://ftp2.census.gov/ces/wp/2004/CES-WP-04-15.pdf
    File Function: First version, 2004
    Download Restriction: no

    Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 04-15.

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    Length: 26 pages
    Date of creation: Aug 2004
    Date of revision:
    Handle: RePEc:cen:wpaper:04-15
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    1. repec:ner:tilbur:urn:nbn:nl:ui:12-376115 is not listed on IDEAS
    2. Oughton, Christine & Whittam, Geoff, 1997. "Competition and Cooperation in the Small Firm Sector," Scottish Journal of Political Economy, Scottish Economic Society, vol. 44(1), pages 1-30, February.
    3. N Ettlinger, 1997. "An assessment of the small-firm debate in the United States," Environment and Planning A, Pion Ltd, London, vol. 29(3), pages 419-442, March.
    4. Kim, H Youn, 1992. "The Translog Production Function and Variable Returns to Scale," The Review of Economics and Statistics, MIT Press, vol. 74(3), pages 546-52, August.
    5. George J. Stigler, 1951. "The Division of Labor is Limited by the Extent of the Market," Journal of Political Economy, University of Chicago Press, vol. 59, pages 185.
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