Working Paper: NBER ID: w16639
Authors: William R. Kerr; Scott Duke Kominers
Abstract: We model spatial clusters of similar firms. Our model highlights how agglomerative forces lead to localized, individual connections among firms, while interaction costs generate a defined distance over which attraction forces operate. Overlapping firm interactions yield agglomeration clusters that are much larger than the underlying agglomerative forces themselves. Empirically, we demonstrate that our model's assumptions are present in the structure of technology and labor flows within Silicon Valley and its surrounding areas. Our model further identifies how the lengths over which agglomerative forces operate influence the shapes and sizes of industrial clusters; we confirm these predictions using variations across both technology clusters and industry agglomeration.
Keywords: Agglomeration; Cluster Dynamics; Industrial Organization; Economic Geography
JEL Codes: J2; J6; L1; L2; L6; O3; R1; R3
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Agglomerative forces (F12) | Localized connections among firms (L14) |
| Localized connections among firms (L14) | Formation of clusters (C38) |
| Agglomerative forces (F12) | Size of clusters (C38) |
| Lengths of agglomerative forces (C69) | Shapes and sizes of industrial clusters (R12) |
| Concentrated labor requirements (J24) | Size and density of clusters (C38) |