This paper by Vernon Henderson, published as Working Paper 7358 by the National Bureau of Economic Research (NBER), explores the nature and magnitude of local external economies of scale in high-tech and machinery industries. Using census panel data from 487 countries, the study examines the direct effects of the local environment on plant productivity, addressing issues such as endogeneity. The research investigates whether scale externalities are derived from local industry activity alone or from a broader range of local economic activities, and whether these externalities are static or dynamic. The paper also examines the relationship between agglomeration and scale economies, and the mobility of industries across cities. Key findings include the localization of scale externalities, the equal benefit of static externalities for single-plant and corporate plants, and the greater benefit of dynamic externalities for single-plant firms. The study suggests that high-tech industries are more agglomerated than machinery industries, and that changes in scale externalities may not explain the observed changes in industrial concentration over time.This paper by Vernon Henderson, published as Working Paper 7358 by the National Bureau of Economic Research (NBER), explores the nature and magnitude of local external economies of scale in high-tech and machinery industries. Using census panel data from 487 countries, the study examines the direct effects of the local environment on plant productivity, addressing issues such as endogeneity. The research investigates whether scale externalities are derived from local industry activity alone or from a broader range of local economic activities, and whether these externalities are static or dynamic. The paper also examines the relationship between agglomeration and scale economies, and the mobility of industries across cities. Key findings include the localization of scale externalities, the equal benefit of static externalities for single-plant and corporate plants, and the greater benefit of dynamic externalities for single-plant firms. The study suggests that high-tech industries are more agglomerated than machinery industries, and that changes in scale externalities may not explain the observed changes in industrial concentration over time.