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

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  • Christopher H. Wheeler

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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  • Christopher H. Wheeler, 2004. "Productivity and the geographic concentration of industry: the role of plant scale," Working Papers 2004-024, Federal Reserve Bank of St. Louis.
  • Handle: RePEc:fip:fedlwp:2004-024
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    Cited by:

    1. 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.
    2. 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.
    3. 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.
    4. 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. 0(Issue 1), pages 1-10.
    5. 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.
    6. 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.
    7. 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.
    8. 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.
    9. Jun Koo & Jongmin Choi, 2013. "The rise of the biomedical cluster in Wonju, Korea," Chapters,in: Clusters and Economic Growth in Asia, chapter 4, pages 66-84 Edward Elgar Publishing.
    10. 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.
    11. 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..
    12. Alejandra Trejo, 2011. "Competitiveness And The Regional Efficiency Of The Mexican Service Sector," ERSA conference papers ersa10p196, European Regional Science Association.
    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. 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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    Keywords

    Industrial productivity ; Regional economics;

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