Working Paper: NBER ID: w13068
Authors: Glenn Ellison; Edward L. Glaeser; William Kerr
Abstract: Many industries are geographically concentrated. Many mechanisms that could account for such agglomeration have been proposed. We note that these theories make different predictions about which pairs of industries should be coagglomerated. We discuss the measurement of coagglomeration and use data from the Census Bureau's Longitudinal Research Database from 1972 to 1997 to compute pairwise coagglomeration measurements for U.S. manufacturing industries. Industry attributes are used to construct measures of the relevance of each of Marshall's three theories of industry agglomeration to each industry pair: (1) agglomeration saves transport costs by proximity to input suppliers or final consumers, (2) agglomeration allows for labor market pooling, and (3) agglomeration facilitates intellectual spillovers. We assess the importance of the theories via regressions of coagglomeration indices on these measures. Data on characteristics of corresponding industries in the United Kingdom are used as instruments. We find evidence to support each mechanism. Our results suggest that input-output dependencies are the most important factor, followed by labor pooling.
Keywords: agglomeration; coagglomeration; industry; economic geography
JEL Codes: A1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Transport cost savings (R41) | Coagglomeration (R11) |
| Input-output dependencies (C67) | Coagglomeration (R11) |
| Labor market pooling (J68) | Coagglomeration (R11) |
| Intellectual spillovers (O36) | Coagglomeration (R11) |