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A quantitative assessment of the role of agglomeration economies in the spatial concentration of U.S. employment

  • Satyajit Chatterjee

This paper seeks to quantify the contribution of agglomeration economies to the spatial concentration of U.S. employment. A spatial macroeconomic model with heterogeneous localities and agglomeration economies is developed and calibrated to U.S. data on the spatial distribution of employment. The model is used to answer the question: By how much would the spatial concentration of employment decline if agglomeration economies were counterfactually suppressed? For the most plausible calibration, the answer is about 48 percent. More generally, the general equilibrium contribution of agglomeration economies appears to be substantial, with empirically defensible calibrations yielding estimates between 40 and 60 percent.

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File URL: http://www.philadelphiafed.org/research-and-data/publications/working-papers//2006/wp06-20.pdf
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Paper provided by Federal Reserve Bank of Philadelphia in its series Working Papers with number 06-20.

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Date of creation: 2006
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Handle: RePEc:fip:fedpwp:06-20
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  1. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-78, December.
  2. Paul Krugman, 1990. "Increasing Returns and Economic Geography," NBER Working Papers 3275, National Bureau of Economic Research, Inc.
  3. Donald R. Davis & David E. Weinstein, 2002. "Bones, bombs and break points: The geography of economic activity," Discussion Papers 0102-02, Columbia University, Department of Economics.
  4. Jordan Rappaport, 2006. "A productivity model of city crowdedness," Research Working Paper RWP 06-06, Federal Reserve Bank of Kansas City.
  5. Douglas Gollin, 2001. "Getting Income Shares Right," Department of Economics Working Papers 2001-11, Department of Economics, Williams College.
  6. Antonio Ciccone & Robert E. Hall, 1993. "Productivity and the Density of Economic Activity," NBER Working Papers 4313, National Bureau of Economic Research, Inc.
  7. Edward L. Glaeser & Glenn Ellison, 1999. "The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?," American Economic Review, American Economic Association, vol. 89(2), pages 311-316, May.
  8. Gerald Carlino & Satyajit Chatterjee, 2002. "Employment Deconcentration: A New Perspective on America's Postwar Urban Evolution," Journal of Regional Science, Wiley Blackwell, vol. 42(3), pages 445-475.
  9. Moomaw, Ronald L, 1981. "Productivity and City Size? A Critique of the Evidence [Are There Returns to Scale in City Size?]. [Bias in the Cross Section Estimates of the Elasticity of Substitution]," The Quarterly Journal of Economics, MIT Press, vol. 96(4), pages 675-88, November.
  10. Chatterjee, Satyajit & Carlino, Gerald A., 2001. "Aggregate metropolitan employment growth and the deconcentration of metropolitan employment," Journal of Monetary Economics, Elsevier, vol. 48(3), pages 549-583, December.
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