Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach

Donald Siegel and Catherine Morrison Paul

American Economic Review, 1999, vol. 89, issue 1, 272-290

Abstract: Scale economies and agglomeration externalities are alleged to be important determinants of economic growth. To assess these effects, the authors outline and estimate a microfoundations model based on a dynamic cost function specification. This model provides for the separate identification of the impacts of externalities and cyclical utilization on short- and long-run scale economies and input substitution patterns. The authors find that scale economies are prevalent in U.S manufacturing; cost savings and scale effects often attributed to internal inputs may be due to external factors; and supply-side agglomeration effects are greater than demand-side, especially in the long run.

JEL-codes: E23 O47 (search for similar items in EconPapers)
Date: 1999
Note: DOI: 10.1257/aer.89.1.272
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Citations: View citations in EconPapers (85)

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