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American Economic Review Vol. 100 No. 3 2010

What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns

Glenn Ellison1; Edward L. Glaeser2; William R. Kerr3

1 Department of Economics, Massachusetts Institute of Technology, E52-380A, Cambridge, MA 02142, National Bureau of Economic Research. · 2 Department of Economics, Harvard University, Littauer Center 315A, Cambridge, MA 02138, and NBER. · 3 Entrepreneurial Management Unit, Harvard Business School, Rock Center 212, Boston MA 02163, and NBER.

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.

DOI
10.1257/aer.100.3.1195
Volume
100
Issue
3
Pages
1195-1213
Language
en
Sources
openalex crossref bibtex:phds-export.bib

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