IDEAS home Printed from https://ideas.repec.org/p/nbr/nberwo/13833.html
   My bibliography  Save this paper

Identifying Agglomeration Spillovers: Evidence from Million Dollar Plants

Author

Listed:
  • Michael Greenstone
  • Richard Hornbeck
  • Enrico Moretti

Abstract

We quantify agglomeration spillovers by estimating the impact of the opening of a large new manufacturing plant on the total factor productivity (TFP) of incumbent plants in the same county. Articles in the corporate real estate journal Site Selection reveal the county where the "Million Dollar Plant" ultimately chose to locate (the "winning county"), as well as the one or two runner-up counties (the "losing counties"). The incumbent plants in the losing counties are used as a counterfactual for the TFP of incumbent plants in winning counties in the absence of the plant opening. Incumbent plants in winning and losing counties have economically and statistically similar trends in TFP in the 7 years before the opening, which supports the validity of the identifying assumption. After the new plant opening, incumbent plants in winning counties experience a sharp relative increase in TFP. Five years after the opening, TFP of incumbent plants in winning counties is 12% higher than TFP of incumbent plants in losing counties. Consistent with some theories of agglomeration, this effect is larger for incumbent plants that share similar labor and technology pools with the new plant. We also find evidence of a relative increase in skill-adjusted labor costs in winning counties, indicating that the ultimate effect on profits is smaller than the direct increase in productivity.

Suggested Citation

  • Michael Greenstone & Richard Hornbeck & Enrico Moretti, 2008. "Identifying Agglomeration Spillovers: Evidence from Million Dollar Plants," NBER Working Papers 13833, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:13833
    Note: LS PR
    as

    Download full text from publisher

    File URL: http://www.nber.org/papers/w13833.pdf
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. Zvi Griliches & Jacques Mairesse, 1995. "Production Functions: The Search for Identification," NBER Working Papers 5067, National Bureau of Economic Research, Inc.
    2. Davis, James C. & Henderson, J. Vernon, 2008. "The agglomeration of headquarters," Regional Science and Urban Economics, Elsevier, vol. 38(5), pages 445-460, September.
    3. Randy A. Becker & John Haltiwanger & Ron S. Jarmin & Shawn D. Klimek & Daniel J. Wilson, 2006. "Micro and Macro Data Integration: The Case of Capital," NBER Chapters,in: A New Architecture for the U.S. National Accounts, pages 541-610 National Bureau of Economic Research, Inc.
    4. 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.
    5. Roback, Jennifer, 1982. "Wages, Rents, and the Quality of Life," Journal of Political Economy, University of Chicago Press, vol. 90(6), pages 1257-1278, December.
    6. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
    7. Edward Glaeser & Janet Kohlhase, 2003. "Cities, regions and the decline of transport costs," Economics of Governance, Springer, vol. 83(1), pages 197-228, October.
    8. Roback, Jennifer, 1988. "Wages, Rents, and Amenities: Differences among Workers and Regions," Economic Inquiry, Western Economic Association International, vol. 26(1), pages 23-41, January.
    9. 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.
    10. Weiss, Leonard W, 1972. "The Geographic Size of Markets in Manufacturing," The Review of Economics and Statistics, MIT Press, vol. 54(3), pages 245-257, August.
    11. Branstetter, Lee G., 2001. "Are knowledge spillovers international or intranational in scope?: Microeconometric evidence from the U.S. and Japan," Journal of International Economics, Elsevier, vol. 53(1), pages 53-79, February.
    12. Chad Syverson, 2004. "Market Structure and Productivity: A Concrete Example," Journal of Political Economy, University of Chicago Press, vol. 112(6), pages 1181-1222, December.
    13. Krugman, Paul, 1991. "Increasing Returns and Economic Geography," Journal of Political Economy, University of Chicago Press, vol. 99(3), pages 483-499, June.
    14. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
    15. Olley, G Steven & Pakes, Ariel, 1996. "The Dynamics of Productivity in the Telecommunications Equipment Industry," Econometrica, Econometric Society, vol. 64(6), pages 1263-1297, November.
    16. Donald R. Davis & David E. Weinstein, 2002. "Bones, Bombs, and Break Points: The Geography of Economic Activity," American Economic Review, American Economic Association, vol. 92(5), pages 1269-1289, December.
    17. Wagner, Alfred, 1891. "Marshall's Principles of Economics," History of Economic Thought Articles, McMaster University Archive for the History of Economic Thought, vol. 5, pages 319-338.
    18. Chad Syverson, 2004. "Product Substitutability and Productivity Dispersion," The Review of Economics and Statistics, MIT Press, vol. 86(2), pages 534-550, May.
    19. McGahan, Anita M. & Silverman, Brian S., 2001. "How does innovative activity change as industries mature?," International Journal of Industrial Organization, Elsevier, vol. 19(7), pages 1141-1160, July.
    20. Michael Greenstone & Enrico Moretti, 2003. "Bidding for Industrial Plants: Does Winning a 'Million Dollar Plant' Increase Welfare?," NBER Working Papers 9844, National Bureau of Economic Research, Inc.
    21. Rauch James E., 1993. "Productivity Gains from Geographic Concentration of Human Capital: Evidence from the Cities," Journal of Urban Economics, Elsevier, vol. 34(3), pages 380-400, November.
    22. Zvi Griliches, 1958. "Research Costs and Social Returns: Hybrid Corn and Related Innovations," Journal of Political Economy, University of Chicago Press, vol. 66, pages 419-419.
    23. 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.
    24. Edward L. Glaeser, 2001. "The Economics of Location-Based Tax Incentives," Harvard Institute of Economic Research Working Papers 1932, Harvard - Institute of Economic Research.
    25. Manuel Trajtenberg & Adam B. Jaffe & Michael S. Fogarty, 2000. "Knowledge Spillovers and Patent Citations: Evidence from a Survey of Inventors," American Economic Review, American Economic Association, vol. 90(2), pages 215-218, May.
    26. James Levinsohn & Amil Petrin, 2003. "Estimating Production Functions Using Inputs to Control for Unobservables," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 317-341.
    27. Daron Acemoglu, 1996. "A Microfoundation for Social Increasing Returns in Human Capital Accumulation," The Quarterly Journal of Economics, Oxford University Press, vol. 111(3), pages 779-804.
    Full references (including those not matched with items on IDEAS)

    More about this item

    JEL classification:

    • J0 - Labor and Demographic Economics - - General
    • R0 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General

    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:nbr:nberwo:13833. 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: http://edirc.repec.org/data/nberrus.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 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.

    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.