Why do industries coagglomerate? How Marshallian externalities differ by industry and have evolved over time

Dario Diodato, Frank Neffke and Neave O'Clery

No 1814, Papers in Evolutionary Economic Geography (PEEG) from Utrecht University, Department of Human Geography and Spatial Planning, Group Economic Geography

Abstract: The fact that firms benefit from close proximity to other firms with which they can exchange inputs, skilled labor or know-how helps explain why many industrial clusters are so successful. Studying the evolution of coagglomeration patterns, we show that which type of agglomeration benefits firms has drastically changed over the course of a century and differs markedly across industries. Whereas, at the beginning of the twentieth century, industries tended to colocate with their value chain partners, in more recent decades the importance of this channels has declined and colocation seems to be driven more by similarities industries? skill requirements. By calculating industry-specific Marshallian agglomeration forces, we are able to show that, nowadays, skill- sharing is the most salient motive in location choices of services, whereas value chain linkages still explain much of the colocation patterns in manufacturing. Moreover, the estimated degrees to which labor and input-output linkages are reflected in an industry?s coagglomeration patterns help improve predictions of city-industry employment growth.

Keywords: Coagglomeration; Marshallian externalities; labor pooling; value chains; manufacturing; services; regional diversification (search for similar items in EconPapers)
JEL-codes: J24 O14 R11 (search for similar items in EconPapers)
Date: 2018-03, Revised 2018-03
New Economics Papers: this item is included in nep-geo, nep-his, nep-lma, nep-tid and nep-ure
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (44)

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Journal Article: Why do industries coagglomerate? How Marshallian externalities differ by industry and have evolved over time (2018)
Working Paper: Why do Industries Coagglomerate? How Marshallian Externalities Differ by Industry and Have Evolved Over Time (2018)
Working Paper: Why do Industries Coagglomerate? How Marshallian Externalities Differ by Industry and Have Evolved Over Time (2018)
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