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Agglomeration and Co-Agglomeration of Services Industries

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  • Kolko, Jed

Abstract

Economic research on industry location and agglomeration has focused nearly exclusively on manufacturing. This paper shows that services are prominent among the most agglomerated industries, especially at the county level. Because traditional measures of knowledge spillovers, natural resource inputs, and labor pooling explain little of agglomeration in services industries, this paper takes an alternative approach and looks at co-agglomeration to assess why industries cluster together. By considering the location patterns of pairs of industries instead of individual industries, the traditional agglomeration explanations can be measured more richly, and additional measures – like the need to locate near suppliers or customers – can be incorporated. The results show that co-agglomeration between pairs of services industries is driven by knowledge spillovers and the direct trading relationship between the industries, especially at the zip code level. Information technology weakens the need for services industries to co-agglomerate at the state level, perhaps because electronic transport of services outputs lowers the value of longer-distance proximity. These results are in sharp contrast to results for manufacturing, for which labor pooling contributes most to co-agglomeration, and the direct-trading relationship contributes more to state-level co-agglomeration. These differences between services and manufacturing are consistent with simple models of transport costs.

Suggested Citation

  • Kolko, Jed, 2007. "Agglomeration and Co-Agglomeration of Services Industries," MPRA Paper 3362, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:3362
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    File URL: https://mpra.ub.uni-muenchen.de/3362/1/MPRA_paper_3362.pdf
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    References listed on IDEAS

    as
    1. Edward L. Glaeser, Jed Kolko, and Albert Saiz, 2001. "Consumer city," Journal of Economic Geography, Oxford University Press, vol. 1(1), pages 27-50, January.
    2. 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.
    3. Gaspar, Jess & Glaeser, Edward L., 1998. "Information Technology and the Future of Cities," Journal of Urban Economics, Elsevier, vol. 43(1), pages 136-156, January.
    4. David Neumark & Junfu Zhang & Brandon Wall, 2005. "Employment Dynamics and Business Relocation: New Evidence from the National Establishment Time Series," PPIC Working Papers 2005.11, Public Policy Institute of California.
    5. 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.
    6. Duranton, Gilles & Puga, Diego, 2005. "From sectoral to functional urban specialisation," Journal of Urban Economics, Elsevier, vol. 57(2), pages 343-370, March.
    7. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
      • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
      • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
    8. Henderson, Vernon, 1997. "Externalities and Industrial Development," Journal of Urban Economics, Elsevier, vol. 42(3), pages 449-470, November.
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    Citations

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    Cited by:

    1. Robert Faff & Tribeni Lodh & Jerry Pawada, 2012. "Location Decisions of Domestic and Foreign-Affiliated Financial Advisors: Australian Evidence," Journal of Financial Services Research, Springer;Western Finance Association, vol. 42(3), pages 207-228, December.
    2. Tanaka, Kiyoyasu & Hashiguchi, Yoshihiro, 2015. "Agglomeration effects of informal sector: evidence from Cambodia," IDE Discussion Papers 495, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    3. Rafael González-Val, 2011. "What makes cities bigger and richer? New Evidence from 1990–2000 in the US," ERSA conference papers ersa11p325, European Regional Science Association.
    4. 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.
    5. Chris Forman, 2013. "How has information technology use shaped the geography of economic activity?," Chapters,in: Handbook of Industry Studies and Economic Geography, chapter 10, pages 253-270 Edward Elgar Publishing.

    More about this item

    Keywords

    agglomeration; economic geography; services; technology; internet; co-agglomeration; firm location; transport costs;

    JEL classification:

    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • L80 - Industrial Organization - - Industry Studies: Services - - - General

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