Working Paper: NBER ID: w7358
Authors: Vernon Henderson
Abstract: This paper estimates the nature and magnitude of the local externalities from own industry scale, as envisioned by Marshall. Census panel data on individual plants in high-tech and machinery industries across up to 487 countries are utilized, to quantify the direct effects of local external environment on plant productivity. Careful attention is paid to endogeneity issues in estimation. Magnitudes of scale externalities for corporate versus single plant firms are estimated and the sources of externalities (employment, numbers of plants, numbers of births, etc.) and extent (within the county versus extending to the rest of the MSA) are investigated. The paper asks in addition whether externalities are static or dynamic, a key issue in thinking about urban growth and industrial mobility; and whether they are dependent just on local own industry activity or also on overall local urban scale and/or diversity, a key issue in analyzing industrial composition and development of cities. The paper relates the findings on externalities for different industries to the extent of agglomeration and the degree of mobility of those industries across cities.
Keywords: No keywords provided
JEL Codes: R000; O300; L600; S620
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| own industry localization externalities (R32) | scale externalities (D62) |
| number of own industry plants in the same county (L79) | local information spillovers across plants (R32) |
| single-plant firms (L10) | static externalities (D62) |
| corporate plants (M14) | static externalities (D62) |
| single-plant firms (L10) | dynamic externalities (D62) |
| births of new plants (J13) | dynamic externalities (D62) |
| manufacturing activities (L60) | urbanization economies (R11) |
| agglomeration (R11) | scale economies (F12) |
| factors other than scale economy magnitudes (F12) | mobility of industries (F20) |