Working Paper: CEPR ID: DP10673
Authors: Alexander Klein; Nicholas Crafts
Abstract: We investigate the role of industrial structure in productivity growth in U.S. cities between 1880 and 1930 using a new dataset constructed from the Census of Manufactures. We find that increases in specialization were associated with faster productivity growth but that diversity only had positive effects on productivity performance in large cities. We interpret our results as providing strong support for the importance of Marshallian externalities. Industrial specialization increased considerably in U.S. cities in the early 20th century, probably as a result of improved transportation, and we estimate that this resulted in significant gains in labor productivity
Keywords: agglomeration economies; industrial structure; jacobian externalities; manufacturing productivity; marshallian externalities
JEL Codes: N91; N92; O7; R32
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| greater specialization in industrial sectors (L52) | faster labor productivity growth (O49) |
| increased specialization (F12) | substantial rise in labor productivity (O49) |
| industrial diversity (L69) | productivity growth (O49) |
| increased diversity in smaller cities (R23) | negatively impacts productivity (F66) |
| increased diversity in larger cities (R23) | positively impacts productivity (O49) |
| increase in specialization during this period (N93) | accounted for over half of the manufacturing productivity growth (O49) |