What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns
Glenn Ellison, Edward L. Glaeser, William R. Kerr
American Economic Review · 2010 · Volume 100 · Issue 3
Abstract
Why do firms cluster near one another? We test Marshall's theories of industrial agglomeration by examining which industries locate near one another, or coagglomerate. We construct pairwise coagglomeration indices for US manufacturing industries from the Economic Census. We then relate coagglomeration levels to the degree to which industry pairs share goods, labor, or ideas. To reduce reverse causality, where collocation drives input-output linkages or hiring patterns, we use data from UK industries and from US areas where the two industries are not collocated. All three of Marshall's theories of agglomeration are supported, with input-output linkages particularly important. (JEL L14, L60, O33, R23, R32)
Keywords
Transactional Relationships, Contracts and Reputation, Networks, Industry Studies: Manufacturing: General, Technological Change: Choices and Consequences, Diffusion Processes, Urban, Rural, and Regional Economics: Regional Migration, Regional Labor Markets, Population, Neighborhood Characteristics, Other Production and Pricing Analysis
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