Labor Market Density and Increasing Returns to Scale: How Strong is the Evidence?
Models of economic geography posit that the density of economic activity has two e¤ects that oppose each other in equilibrium: decreasing returns to productive activities due to congestion e¤ects and increasing returns that result from information spillovers and local demand externalities. In an inuential paper, Ciccone and Hall (1996) looked at the effect of county level labor market concentration on per-worker Gross State Product in a cross section of US States, and observed that on net, the increasing returns/agglomeration effect dominates. We extend their analysis and re-examine the relationship between density and productivity across industries and over both states and time. Through careful identi cation of the source and nature of productivity shocks, we show that the evidence for agglomeration effects is indeed quite robust, even within industries, providing evidence for the presence of Marshallian externalities. As for the balance of agglomeration and congestion e¤ects found in previous literature, what we call net increasing returns to scale", the evidence is much weaker.
|Date of creation:||May 2002|
|Date of revision:||Feb 2011|
|Contact details of provider:|| Postal: Box 353330, Seattle, WA 98193-3330|
Web page: http://www.econ.washington.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
When requesting a correction, please mention this item's handle: RePEc:udb:wpaper:uwec-2011-05-r. 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: (Michael Goldblatt)
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.