Tales of the city: what do agglomeration cases tell us about agglomeration in general?

Giulia Faggio, Olmo Silva and William Strange

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This article considers the heterogeneous microfoundations of agglomeration economies. It studies the co-location of industries to look for evidence of labour pooling, input sharing and knowledge spillovers. The novel contribution of the article is that it estimates single-industry models using a common empirical framework that exploits the cross-sectional variation in how one industry co-locates with the other industries in the economy. This unified approach yields evidence on the relative importance of the Marshallian microfoundations at the single-industry level, allowing for like-for-like cross-industry comparisons on the determinants of agglomeration. Using UK data, we estimate such microfoundation models for 97 manufacturing sectors, including the classic agglomeration cases of automobiles, computers, cutlery and textiles. These four cases—as with all of the individual industry models we estimate—clearly show the importance of the Marshallian forces. However, they also highlight how the importance of these forces varies across industries—implying that extrapolation from cases should be viewed with caution. The article concludes with an investigation of the pattern of heterogeneity. The degree of an industry’s clustering (localisation), entrepreneurship, incumbent firm size and worker education are shown to contribute to the pattern of heterogeneous microfoundations.

Keywords: agglomeration; microfoundations; heterogeneity; industrial clusters; UKRI block grant (search for similar items in EconPapers)
JEL-codes: L52 L60 R10 R12 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2020-09-01
New Economics Papers: this item is included in nep-eff and nep-tid
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Published in Journal of Economic Geography, 1, September, 2020, 20(5), pp. 1117 - 1143. ISSN: 1468-2702

Downloads: (external link)
http://eprints.lse.ac.uk/103571/ Open access version. (application/pdf)

Related works:
Journal Article: Tales of the city: what do agglomeration cases tell us about agglomeration in general? (2020)
Working Paper: Tales of the city: what do agglomeration cases tell us about agglomeration in general? (2019)
Working Paper: Tales of the City: What Do Agglomeration Cases Tell Us About Agglomeration in General? (2019)
Working Paper: Tales of the city: what do agglomeration cases tell us about agglomeration in general? (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:103571

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