IDEAS home Printed from https://ideas.repec.org/p/hbs/wpaper/16-037.html
   My bibliography  Save this paper

The Logic of Agglomeration

Author

Listed:
  • Gilles Duranton

    (University of Pennsylvania Wharton School)

  • William R. Kerr

    (Harvard Business School, Entrepreneurial Management Unit)

Abstract

This review discusses frontier topics in economic geography as they relate to firms and agglomeration economies. We focus on areas where empirical research is scarce but possible. We first outline a conceptual framework for city formation that allows us to contemplate what empiricists might study when using firm-level data to compare the functioning of cities and industries with each other. We then examine a second model of the internal structure of a cluster to examine possibilities with firm-level data for better exposing the internal operations of clusters. An overwhelming theme of our review is the vast scope for enhancements of our picture of agglomeration with the new data that are emerging.

Suggested Citation

  • Gilles Duranton & William R. Kerr, 2015. "The Logic of Agglomeration," Harvard Business School Working Papers 16-037, Harvard Business School.
  • Handle: RePEc:hbs:wpaper:16-037
    as

    Download full text from publisher

    File URL: http://www.hbs.edu/faculty/pages/download.aspx?name=16-037.pdf
    Download Restriction: no
    ---><---

    Other versions of this item:

    References listed on IDEAS

    as
    1. Gilles Duranton & Diego Puga, 2001. "Nursery Cities: Urban Diversity, Process Innovation, and the Life Cycle of Products," American Economic Review, American Economic Association, vol. 91(5), pages 1454-1477, December.
    2. William R. Kerr & Scott Duke Kominers, 2015. "Agglomerative Forces and Cluster Shapes," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 877-899, October.
    3. Combes, Pierre-Philippe & Duranton, Gilles, 2006. "Labour pooling, labour poaching, and spatial clustering," Regional Science and Urban Economics, Elsevier, vol. 36(1), pages 1-28, January.
    4. Kristian Behrens & Gilles Duranton & Frédéric Robert-Nicoud, 2014. "Productive Cities: Sorting, Selection, and Agglomeration," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 507-553.
    5. Pierre‐Philippe Combes & Gilles Duranton & Laurent Gobillon & Diego Puga & Sébastien Roux, 2012. "The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection," Econometrica, Econometric Society, vol. 80(6), pages 2543-2594, November.
    6. Megha Mukim, 2015. "Coagglomeration of formal and informal industry: evidence from India," Journal of Economic Geography, Oxford University Press, vol. 15(2), pages 329-351.
    7. Klepper, Steven, 2010. "The origin and growth of industry clusters: The making of Silicon Valley and Detroit," Journal of Urban Economics, Elsevier, vol. 67(1), pages 15-32, January.
    8. Edward L. Glaeser & William R. Kerr & Giacomo A. M. Ponzetto, 2010. "Clusters of Entrepreneurship," NBER Chapters, in: Cities and Entrepreneurship, National Bureau of Economic Research, Inc.
    9. Kerr, William R., 2010. "Breakthrough inventions and migrating clusters of innovation," Journal of Urban Economics, Elsevier, vol. 67(1), pages 46-60, January.
    10. Redding, Stephen J. & Turner, Matthew A., 2015. "Transportation Costs and the Spatial Organization of Economic Activity," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1339-1398, Elsevier.
    11. Mercedes Delgado & Michael E. Porter & Scott Stern, 2010. "Clusters and entrepreneurship," Journal of Economic Geography, Oxford University Press, vol. 10(4), pages 495-518, July.
    12. Bruce Fallick & Charles A. Fleischman & James B. Rebitzer, 2006. "Job-Hopping in Silicon Valley: Some Evidence Concerning the Microfoundations of a High-Technology Cluster," The Review of Economics and Statistics, MIT Press, vol. 88(3), pages 472-481, August.
    13. Michel Serafinelli, 2015. "Good Firms, Worker Flows and Local Productivity," Working Papers tecipa-538, University of Toronto, Department of Economics.
    14. Alfaro, Laura & Chen, Maggie Xiaoyang, 2014. "The global agglomeration of multinational firms," Journal of International Economics, Elsevier, vol. 94(2), pages 263-276.
    15. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    16. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853, Elsevier.
    17. Gilles Duranton & Henry G. Overman, 2008. "Exploring The Detailed Location Patterns Of U.K. Manufacturing Industries Using Microgeographic Data," Journal of Regional Science, Wiley Blackwell, vol. 48(1), pages 213-243, February.
    18. Claudio Michelacci & Olmo Silva, 2007. "Why So Many Local Entrepreneurs?," The Review of Economics and Statistics, MIT Press, vol. 89(4), pages 615-633, November.
    19. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-656, September.
    20. Helsley, Robert W. & Strange, William C., 1990. "Matching and agglomeration economies in a system of cities," Regional Science and Urban Economics, Elsevier, vol. 20(2), pages 189-212, September.
    21. Guy Dumais & Glenn Ellison & Edward L. Glaeser, 2002. "Geographic Concentration As A Dynamic Process," The Review of Economics and Statistics, MIT Press, vol. 84(2), pages 193-204, May.
    22. Michael Kremer, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 551-575.
    23. Pierre Philippe Combes & Gilles Duranton & Henry G. Overman, 2005. "Agglomeration and the adjustment of the spatial economy§," Papers in Regional Science, Wiley Blackwell, vol. 84(3), pages 311-349, August.
    24. Edward L. Glaeser & William R. Kerr, 2009. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(3), pages 623-663, September.
    25. Feldman, Maryann P. & Kogler, Dieter F., 2010. "Stylized Facts in the Geography of Innovation," Handbook of the Economics of Innovation, in: Bronwyn H. Hall & Nathan Rosenberg (ed.), Handbook of the Economics of Innovation, edition 1, volume 1, chapter 0, pages 381-410, Elsevier.
    26. Aaron Chatterji & Edward Glaeser & William Kerr, 2014. "Clusters of Entrepreneurship and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 14(1), pages 129-166.
    27. Gilles Duranton, 2007. "Urban Evolutions: The Fast, the Slow, and the Still," American Economic Review, American Economic Association, vol. 97(1), pages 197-221, March.
    28. Stuart S. Rosenthal & William C. Strange, 2003. "Geography, Industrial Organization, and Agglomeration," The Review of Economics and Statistics, MIT Press, vol. 85(2), pages 377-393, May.
    29. Tom Kemeny & Maryann Feldman & Frank Ethridge & Ted Zoller, 2016. "The economic value of local social networks," Journal of Economic Geography, Oxford University Press, vol. 16(5), pages 1101-1122.
    30. Duranton, Gilles & Puga, Diego, 2004. "Micro-foundations of urban agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 48, pages 2063-2117, Elsevier.
    31. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 171-245, Elsevier.
    32. Hoyt Bleakley & Jeffrey Lin, 2012. "Portage and Path Dependence," The Quarterly Journal of Economics, Oxford University Press, vol. 127(2), pages 587-644.
    33. Edward L. Glaeser & Sari Pekkala Kerr & William R. Kerr, 2015. "Entrepreneurship and Urban Growth: An Empirical Assessment with Historical Mines," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 498-520, May.
    34. Adam B. Jaffe & Manuel Trajtenberg & Rebecca Henderson, 1993. "Geographic Localization of Knowledge Spillovers as Evidenced by Patent Citations," The Quarterly Journal of Economics, Oxford University Press, vol. 108(3), pages 577-598.
    35. Gilles Duranton & Henry G. Overman, 2005. "Testing for Localization Using Micro-Geographic Data," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 1077-1106.
    36. Glenn Ellison & Edward L. Glaeser & William R. Kerr, 2010. "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns," American Economic Review, American Economic Association, vol. 100(3), pages 1195-1213, June.
    37. William R. Kerr & William F. Lincoln, 2010. "The Supply Side of Innovation: H-1B Visa Reforms and U.S. Ethnic Invention," Journal of Labor Economics, University of Chicago Press, vol. 28(3), pages 473-508, July.
    38. Rosenthal, Stuart S. & Strange, William C., 2001. "The Determinants of Agglomeration," Journal of Urban Economics, Elsevier, vol. 50(2), pages 191-229, September.
    39. Gilles Duranton, 2008. "Viewpoint: From cities to productivity and growth in developing countries," Canadian Journal of Economics, Canadian Economics Association, vol. 41(3), pages 689-736, August.
    40. Philippe Aghion & Steven Durlauf (ed.), 2014. "Handbook of Economic Growth," Handbook of Economic Growth, Elsevier, edition 1, volume 2, number 2.
    41. Chang-Tai Hsieh & Peter J. Klenow, 2014. "The Life Cycle of Plants in India and Mexico," The Quarterly Journal of Economics, Oxford University Press, vol. 129(3), pages 1035-1084.
    42. Audretsch, David B & Feldman, Maryann P, 1996. "R&D Spillovers and the Geography of Innovation and Production," American Economic Review, American Economic Association, vol. 86(3), pages 630-640, June.
    43. Stuart S. Rosenthal & William C. Strange, 2012. "Female Entrepreneurship, Agglomeration, and a New Spatial Mismatch," The Review of Economics and Statistics, MIT Press, vol. 94(3), pages 764-788, August.
    44. Helsley, Robert W. & Strange, William C., 2002. "Innovation and Input Sharing," Journal of Urban Economics, Elsevier, vol. 51(1), pages 25-45, January.
    45. Glaeser, Edward L., 2008. "Cities, Agglomeration, and Spatial Equilibrium," OUP Catalogue, Oxford University Press, number 9780199290444.
    46. Ejaz Ghani & William R. Kerr & Stephen D. O'Connell, 2013. "Local industrial structures and female entrepreneurship in India," Journal of Economic Geography, Oxford University Press, vol. 13(6), pages 929-964, November.
    47. Gilles Duranton, 2015. "Growing through Cities in Developing Countries," World Bank Research Observer, World Bank Group, vol. 30(1), pages 39-73.
    48. Mohammad Arzaghi & J. Vernon Henderson, 2008. "Networking off Madison Avenue," Review of Economic Studies, Oxford University Press, vol. 75(4), pages 1011-1038.
    49. Gilles Duranton & J. V. Henderson & William C. Strange (ed.), 2015. "Handbook of Regional and Urban Economics," Handbook of Regional and Urban Economics, Elsevier, edition 1, volume 5, number 5.
    50. Robert W. Helsley & William C. Strange, 2014. "Coagglomeration, Clusters, and the Scale and Composition of Cities," Journal of Political Economy, University of Chicago Press, vol. 122(5), pages 1064-1093.
    51. Rosenthal, Stuart S. & Strange, William C., 2004. "Evidence on the nature and sources of agglomeration economies," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 49, pages 2119-2171, Elsevier.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Sandra Bernick & Richard Davies & Anna Valero, 2017. "Industry in Britain: an atlas," CentrePiece - The Magazine for Economic Performance 513, Centre for Economic Performance, LSE.
    2. Laura Alfaro & Maggie X. Chen, 2016. "Location Fundamentals, Agglomeration Economies, and the Geography of Multinational Firms," Working Papers 2016-18, The George Washington University, Institute for International Economic Policy.
    3. Ejermo, Olof & Hussinger, Katrin & Kalash, Basheer & Schubert, Torben, 2021. "Innovation in Malmö after the Öresund Bridge," ZEW Discussion Papers 21-042, ZEW - Leibniz Centre for European Economic Research.
    4. Rusanovskiy, Viktor (Русановский, Виктор) & Markov, Vladimir (Марков, Владимир) & Brovkova, Anna (Бровкова, Анна), 2018. "Modeling the Effects of Spatial Localization in Urban Agglomerations of Russia [Моделирование Эффекта Пространственной Локализации В Городских Агломерациях России]," Economic Policy, Russian Presidential Academy of National Economy and Public Administration, vol. 6, December.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Carlino, Gerald & Kerr, William R., 2015. "Agglomeration and Innovation," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 349-404, Elsevier.
    2. William R. Kerr & Frederic Robert-Nicoud, 2020. "Tech Clusters," Journal of Economic Perspectives, American Economic Association, vol. 34(3), pages 50-76, Summer.
    3. repec:bof:bofrdp:urn:nbn:fi:bof-201512111472 is not listed on IDEAS
    4. Aaron Chatterji & Edward Glaeser & William Kerr, 2014. "Clusters of Entrepreneurship and Innovation," Innovation Policy and the Economy, University of Chicago Press, vol. 14(1), pages 129-166.
    5. William R. Kerr & Scott Duke Kominers, 2015. "Agglomerative Forces and Cluster Shapes," The Review of Economics and Statistics, MIT Press, vol. 97(4), pages 877-899, October.
    6. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 247-348, Elsevier.
    7. Edward L. Glaeser & William R. Kerr, 2009. "Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(3), pages 623-663, September.
    8. Behrens, Kristian & Robert-Nicoud, Frédéric, 2015. "Agglomeration Theory with Heterogeneous Agents," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 171-245, Elsevier.
    9. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth, in: Philippe Aghion & Steven Durlauf (ed.), Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853, Elsevier.
    10. Oliver Falck & Christina Guenther & Stephan Heblich & William R. Kerr, 2013. "From Russia with love: the impact of relocated firms on incumbent survival," Journal of Economic Geography, Oxford University Press, vol. 13(3), pages 419-449, May.
    11. Kerr, William R., 2010. "Breakthrough inventions and migrating clusters of innovation," Journal of Urban Economics, Elsevier, vol. 67(1), pages 46-60, January.
    12. Diego Puga, 2010. "The Magnitude And Causes Of Agglomeration Economies," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 203-219, February.
    13. Desmet, Klaus & Henderson, J. Vernon, 2015. "The Geography of Development Within Countries," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1457-1517, Elsevier.
    14. Kristian Behrens, 2016. "Agglomeration and clusters: Tools and insights from coagglomeration patterns," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(4), pages 1293-1339, November.
    15. Xiwei Zhu & Ye Liu & Ming He & Deming Luo & Yiyun Wu, 2019. "Entrepreneurship and industrial clusters: evidence from China industrial census," Small Business Economics, Springer, vol. 52(3), pages 595-616, March.
    16. Delgado, Mercedes & Porter, Michael E. & Stern, Scott, 2014. "Clusters, convergence, and economic performance," Research Policy, Elsevier, vol. 43(10), pages 1785-1799.
    17. Edward L. Glaeser & Sari Pekkala Kerr & William R. Kerr, 2015. "Entrepreneurship and Urban Growth: An Empirical Assessment with Historical Mines," The Review of Economics and Statistics, MIT Press, vol. 97(2), pages 498-520, May.
    18. Moretti, Enrico, 2011. "Local Labor Markets," Handbook of Labor Economics, in: O. Ashenfelter & D. Card (ed.), Handbook of Labor Economics, edition 1, volume 4, chapter 14, pages 1237-1313, Elsevier.
    19. Lychagin, Sergey, 2016. "Spillovers, absorptive capacity and agglomeration," Journal of Urban Economics, Elsevier, vol. 96(C), pages 17-35.
    20. William R. Kerr, 2010. "The Agglomeration of U.S. Ethnic Inventors," NBER Chapters, in: Agglomeration Economics, pages 237-276, National Bureau of Economic Research, Inc.
    21. Stephen J. Redding, 2010. "The Empirics Of New Economic Geography," Journal of Regional Science, Wiley Blackwell, vol. 50(1), pages 297-311, February.

    More about this item

    Keywords

    Agglomeration; clusters; cities; innovation;
    All these keywords.

    JEL classification:

    • J2 - Labor and Demographic Economics - - Demand and Supply of Labor
    • J6 - Labor and Demographic Economics - - Mobility, Unemployment, Vacancies, and Immigrant Workers
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L2 - Industrial Organization - - Firm Objectives, Organization, and Behavior
    • L6 - Industrial Organization - - Industry Studies: Manufacturing
    • O1 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights
    • R1 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics
    • R3 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hbs:wpaper:16-037. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: . General contact details of provider: https://edirc.repec.org/data/harbsus.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: HBS (email available below). General contact details of provider: https://edirc.repec.org/data/harbsus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.