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Identifying Agglomeration Spillovers: Evidence from Winners and Losers of Large Plant Openings

  • Michael Greenstone
  • Richard Hornbeck
  • Enrico Moretti

We quantify agglomeration spillovers by comparing changes in total factor productivity (TFP) among incumbent plants in "winning" counties that attracted a large manufacturing plant and "losing" counties that were the new plant's runner-up choice. Winning and losing counties have similar trends in TFP prior to the new plant opening. Five years after the opening, incumbent plants' TFP is 12 percent higher in winning counties. This productivity spillover is larger for plants sharing similar labor and technology pools with the new plant. Consistent with spatial equilibrium models, labor costs increase in winning counties, indicating that profits ultimately increase less than productivity. (c) 2010 by The University of Chicago. All rights reserved..

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Paper provided by Harvard University OpenScholar in its series Working Paper with number 17740.

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