This paper makes two significant contributions to the empirical literature on agglomeration economies. First, it uses a rich database and mapping software to measure the geographic extent of agglomerative externalities, addressing the gap in previous studies that have assumed agglomeration economies operate at a metropolitan scale. Second, it tests for the existence of organizational agglomeration economies, a source of increasing returns that has not been previously considered in empirical work.
The paper focuses on two key questions: the geographic scope of agglomerative externalities and how the organization of economic activity within a city affects the value of agglomeration. It finds that localization economies, or the benefits of spatial concentration within a given industry, attenuate rapidly over the first few miles and then slow down. This pattern is consistent with theoretical models and known urban facts. Additionally, the paper finds that industrial structure and corporate organization influence the benefits of agglomeration. Specifically, employment at small establishments has a larger effect on births and new establishment employment than employment at medium or large establishments, supporting the idea that a more entrepreneurial industrial system promotes growth. However, the effects of subsidiary status on agglomeration are mixed, suggesting that subsidiary status may not be a robust measure of organizational structure.
The results are robust to various specifications and estimation methods, highlighting the importance of considering both industrial organization and micro geography in future studies of agglomeration economies.This paper makes two significant contributions to the empirical literature on agglomeration economies. First, it uses a rich database and mapping software to measure the geographic extent of agglomerative externalities, addressing the gap in previous studies that have assumed agglomeration economies operate at a metropolitan scale. Second, it tests for the existence of organizational agglomeration economies, a source of increasing returns that has not been previously considered in empirical work.
The paper focuses on two key questions: the geographic scope of agglomerative externalities and how the organization of economic activity within a city affects the value of agglomeration. It finds that localization economies, or the benefits of spatial concentration within a given industry, attenuate rapidly over the first few miles and then slow down. This pattern is consistent with theoretical models and known urban facts. Additionally, the paper finds that industrial structure and corporate organization influence the benefits of agglomeration. Specifically, employment at small establishments has a larger effect on births and new establishment employment than employment at medium or large establishments, supporting the idea that a more entrepreneurial industrial system promotes growth. However, the effects of subsidiary status on agglomeration are mixed, suggesting that subsidiary status may not be a robust measure of organizational structure.
The results are robust to various specifications and estimation methods, highlighting the importance of considering both industrial organization and micro geography in future studies of agglomeration economies.