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The Empirics of Agglomeration Economies

Author

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  • Combes, Pierre-Philippe

    (GATE, University of Lyon)

  • Gobillon, Laurent

    (Paris School of Economics)

Abstract

We propose an integrated framework to discuss the empirical literature on the local determinants of agglomeration effects. We start by presenting the theoretical mechanisms that ground individual and aggregate empirical specifications. We gradually introduce static effects, dynamic effects, and workers' endogenous location choices. We emphasise the impact of local density on productivity but we also consider many other local determinants supported by theory. Empirical issues are then addressed. Most important concerns are about endogeneity at the local and individual levels, the choice of a productivity measure between wage and TFP, and the roles of spatial scale, firms' characteristics, and functional forms. Estimated impacts of local determinants of productivity, employment, and firms' locations choices are surveyed for both developed and developing economies. We finally provide a discussion of attempts to identify and quantify specific agglomeration mechanisms.

Suggested Citation

  • Combes, Pierre-Philippe & Gobillon, Laurent, 2014. "The Empirics of Agglomeration Economies," IZA Discussion Papers 8508, Institute of Labor Economics (IZA).
  • Handle: RePEc:iza:izadps:dp8508
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    More about this item

    Keywords

    agglomeration gains; density; sorting; learning; location choices;
    All these keywords.

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials

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