Agglomeration, Enterprise Size, and Productivity
August 2004
Working Paper Number:
CES-04-15
Abstract
Much research on agglomeration economies, and particularly recent work that builds on Marshall's concept of the industrial district, postulates that benefits derived from proximity between businesses are strongest for small enterprises (Humphrey 1995, Sweeney and Feser 1998). With internal economies a function of the shape of the average cost curve and level of production, and external economies in shifts of that curve, a small firm enjoying external economies characteristic of industrial districts (or complexes or simply urbanized areas) may face the same average costs as the larger firm producing a higher volume of output (Oughton and Whittam 1997; Carlsson 1996; Humphrey 1995). Thus we observe the seeming paradox of large firms that enjoy internal economies of scale co-existing with smaller enterprises that should, by all accounts, be operating below minimum efficient scale. With the Birch-inspired debate on the relative job- and innovation-generating capacity of small and large firms abating (Ettlinger 1997), research on the small firm sector has shifted to an examination of the business strategies and sources of competitiveness of small enterprises (e.g., Pratten 1991, Nooteboom 1993). Technological external scale economies are a key feature of this research (Oughton and Whittam 1997).
Document Tags and Keywords
Keywords
Keywords are automatically generated using KeyBERT, a powerful and innovative
keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant
keywords.
By analyzing the content of working papers, KeyBERT identifies terms and phrases that capture the essence of the
text, highlighting the most significant topics and trends. This approach not only enhances searchability but
provides connections that go beyond potentially domain-specific author-defined keywords.
:
production,
enterprise,
industrial,
growth,
industry productivity,
efficiency,
sector,
larger firms,
small firms,
regional,
specialization,
area,
regional economic,
region,
geographically,
locality,
externality,
geography,
agglomeration economies,
agglomeration
Tags
Tags are automatically generated using a pretrained language model from spaCy, which excels at
several tasks, including entity tagging.
The model is able to label words and phrases by part-of-speech,
including "organizations." By filtering for frequent words and phrases labeled as "organizations", papers are
identified to contain references to specific institutions, datasets, and other organizations.
:
Bureau of Labor Statistics,
Longitudinal Research Database,
National Science Foundation,
Bureau of Economic Analysis,
County Business Patterns,
Patent and Trademark Office
Similar Working Papers
Similarity between working papers are determined by an unsupervised neural
network model
know as Doc2Vec.
Doc2Vec is a model that represents entire documents as fixed-length vectors, allowing for the
capture of semantic meaning in a way that relates to the context of words within the document. The model learns to
associate a unique vector with each document while simultaneously learning word vectors, enabling tasks such as
document classification, clustering, and similarity detection by preserving the order and structure of words. The
document vectors are compared using cosine similarity/distance to determine the most similar working papers.
Papers identified with 🔥 are in the top 20% of similarity.
The 10 most similar working papers to the working paper 'Agglomeration, Enterprise Size, and Productivity' are listed below in order of similarity.
-
Working PaperTracing the Sources of Local External Economies🔥
August 2004
Working Paper Number:
CES-04-13
In a cross-sectional establishment-level analysis using confidential secondary data, I evaluate the influence of commonly postulated sources of localized external economies'supplier access, labor pools, and knowledge spillovers'on the productivity of two U.S. manufacturing sectors (farm and garden machinery and measuring and controlling devices). Measures incorporating different distance decay specifications provide evidence of the spatial extent of the various externality sources. Chinitz's (1961) hypothesis of the link between local industrial organization and agglomeration economies is also investigated. The results show evidence of labor pooling economies and university-linked knowledge spillovers in the case of the higher technology measuring and controlling devices sector, while access to input supplies and location near centers of applied innovation positively influence efficiency in the farm and garden machinery industry. Both sectors benefit from proximity to producer services, though primarily at a regional rather than highly localized scale.View Full Paper PDF
-
Working PaperA Flexible Test for Agglomeration Economies in Two U.S. Manufacturing Industries🔥
August 2004
Working Paper Number:
CES-04-14
This paper uses the inverse input demand function framework of Kim (1992) to test for economies of industry and urban size in two U.S. manufacturing sectors of differing technology intensity: farm and garden machinery (SIC 352) and measuring and controlling devices (SIC 382). The inverse input demand framework permits the estimation of the production function jointly with a set of cost shares without the imposition of prior economic restrictions. Tests using plant-level data suggest the presence of population scale (urbanization) economies in the moderate- to low-technology farm and garden machinery sector and industry scale (localization) economies in the higher technology measuring and controlling devices sector. The efficiency and generality of the inverse input demand approach are particularly appropriate for micro-level studies of agglomeration economies where prior assumptions regarding homogeneity and homotheticity are less appropriate.View Full Paper PDF
-
Working PaperThe Spatial Extent of Agglomeration Economies: Evidence from Three U.S. Manufacturing Industries🔥
January 2012
Working Paper Number:
CES-12-01
The spatial extent of localized agglomeration economies constitutes one of the central current questions in regional science. It is crucial for understanding firm location decisions and for assessing the influence of proximity in shaping spatial patterns of economic activity, yet clear-cut answers are difficult to come by. Theoretical work often fails to define or specify the spatial dimension of agglomeration phenomena. Existing empirical evidence is far from consistent. Most sources of data on economic performance do not supply micro-level information containing usable geographic locations. This paper provides evidence of the distances across which distinct sources of agglomeration economies generate benefits for plants belonging to three manufacturing industries in the United States. Confidential data from the Longitudinal Research Database of the United States Census Bureau are used to estimate cross-sectional production function systems at the establishment level for three contrasting industries in three different years. Along with relevant establishment, industry, and regional characteristics, the production functions include variables that indicate the local availability of potential labor and supply pools and knowledge spillovers. Information on individual plant locations at the county scale permits spatial differentiation of the agglomeration variables within geographic regions. Multiple distance decay profiles are investigated in order to explore how modifying the operationalization of proximity affects indicated patterns of agglomeration externalities and interfirm interactions. The results imply that industry characteristics are at least as important as the type of externality mechanism in determining the spatial pattern of agglomeration benefits. The research methods borrow from earlier work by the author that examines the relationships between regional industrial structure and manufacturing production.View Full Paper PDF
-
Working PaperRegional Industrial Dominance, Agglomeration Economies, and Manufacturing Plant Productivity🔥
December 2007
Working Paper Number:
CES-07-31
In a seminal article, Benjamin Chinitz (1961) focused attention on the effects that industry size, structure, and economic diversification have on firm performance and regional economies. He also raised a related but conceptually distinct question that has been overlooked since: how does the extent to which a regional industry is concentrated in a single or small number of firms impact the performance of other local firms within that industry? He suggested that such regional industrial dominance may impact input prices, limit capital accessibility, deter entrepreneurial activity, and reduce the regional availability of agglomeration economies such as specialized labor and supply pools In this paper, we use an establishment-level production function to quantify the links between industrial dominance, agglomeration economies, and firm performance. We consider two questions. First, do greater levels of regional industrial dominance lead to lower economic performance by small, dominated manufacturing plants? Second, are small plants in dominated regional industries more limited in capturing regional agglomeration benefits and therefore do they face rigidities in deploying production factors to maximum advantage? Our results suggest that regional industrial organization does influence productivity but that the effect tends to be a direct one, rather than an indirect effect via its influence on agglomeration economies.View Full Paper PDF
-
Working PaperHow Does Size Matter? Investigating the Relationships Among Plant Size, Industrial Structure, and Manufacturing Productivity🔥
March 2011
Working Paper Number:
CES-11-08
Industrial concentration and market power have been studied extensively at the national scale, in fields ranging from economics and industrial organization to regional science and economic development. At the regional scale, however, industrial structure and firm size relationships have received little attention outside of non-generalizable case studies, primarily because accurate measurements require difficult-to-obtain plant- or firm-level information. Readily available secondary data sources on establishment size distributions (such as County Business Patterns or the Census of Manufactures) cannot be linked to performance information for particular establishments or firms. Yet region-specific industrial structure may be a crucial determinant of firm performance and thus regional economic fortunes as well (Chinitz 1961; Christopherson and Clark 2007). This paper examines how industrial concentration and agglomeration economies impact plant performance, focusing on the influence of establishment size in mediating these effects. The Longitudinal Research Database of the U.S. Census Bureau is accessed to construct production functions for three manufacturing industries nationwide. These production functions, specified at the establishment level, incorporate characteristics of establishments, industries, and regions, including spatially-differentiated measures of agglomeration economies. Establishment size is evaluated both as an absolute metric and relative to other regional industry plants, as theory suggests that absolute size may be most pertinent to agglomeration benefits but relative size more relevant to industrial structure (Caves and Barton 1990; Bothner 2005). The research builds on earlier work by the author that establishes a direct link between regional industry concentration and the productivity of manufacturing establishments.View Full Paper PDF
-
Working PaperConcentration, Diversity, and Manufacturing Performance
July 2010
Working Paper Number:
CES-10-14
Regional economist Benjamin Chinitz was one of the most successful proponents of the idea that regional industrial structure is an important determinant of economic performance. His influential article in the American Economic Review in 1961 prompted substantial research measuring industrial structure at the regional scale and examining its relationships to economic outcomes. A considerable portion of this work operationalized the concept of regional industrial structure as sectoral diversity, the degree to which the composition of an economy is spread across heterogeneous activities. Diversity is a relatively simple construct to measure and interpret, but does not capture the implications of Chinitz's ideas fully. The structure within regional industries may also influence the performance of business enterprises. In particular, regional intra-industry concentration'the extent to which an industry is dominated by a few relatively large firms in a locality'has not appeared in empirical work studying economic performance apart from individual case studies, principally because accurately measuring concentration within a regional industry requires firm-level information. Multiple establishments of varying sizes in a given locality may be part of the same firm. Therefore, secondary data sources on establishment size distributions (such as County Business Patterns or aggregated information from the Census of Manufactures) can yield only deceptive portrayals of the level of regional industrial concentration. This paper uses the Longitudinal Research Database, a confidential establishment-level dataset compiled by the United States Census Bureau, to compare the influences of industrial diversity and intra-industry concentration upon regional and firm-level economic outcomes. Manufacturing establishments are aggregated into firms and several indicators of regional industrial concentration are calculated at multiple levels of industrial aggregation. These concentration indicators, along with a regional sectoral diversity measure, are related to employment change over time and incorporated into plant productivity estimations, in order to examine and distinguish the relationships between the differing aspects of regional industrial structure and economic performance. A better understanding of the particular links between regional industrial structure and economic performance can be used to improve economic development planning efforts. With continuing economic restructuring and associated workforce dislocation in the United States and worldwide, industrial concentration and over-specialization are separate mechanisms by which regions may 'lock in' to particular competencies and limit the capacity to adjust quickly and efficiently to changing markets and technologies. The most appropriate and effective policies for improving economic adaptability should reflect the structural characteristics that limit flexibility. This paper gauges the consequences of distinct facets of regional industrial structure, adding new depth to the study of regional industries by economic development planners and researchers.View Full Paper PDF
-
Working PaperTrends in Regional Industrial Concentration in the United States
April 2009
Working Paper Number:
CES-09-06
In a seminal article, Benjamin Chinitz (1961) raises the question of the effects that industry size, structure, and economic diversification may have on firm performance and regional economies. His line of inquiry suggests a related but conceptually distinct issue: how does the extent to which a industry is regionally dominated'concentrated locally in a single or small number of firms'impact the local performance of that industry? This question has received little attention, principally because accurately measuring industrial concentration at the regional scale requires firm-level information. This paper makes use of confidential plant- and firm-level manufacturing data to explore patterns of industrial concentration in the United States at the regional scale. Regional analogues of concentration ratios and other measures commonly used in the aspatial industrial organization literature indicate the extent to which manufacturing activity is concentrated in a small number of firms. Both the manufacturing sector as a whole and major manufacturing industry sectors are examined in order to determine the extent of industrial concentration in the continental United States, to explore changes over time in geographic patterns of concentration, and to investigate associations between industrial concentration and employment growth at the regional scale. Implications for understanding regional growth and for devising regional economic development policy are discussed.View Full Paper PDF
-
Working PaperMarshall's Scale Economies
December 2001
Working Paper Number:
CES-01-17
In this paper, using panel data, I estimate plant level production functions that include variables that allow for two types of scale externalities which plants experie nce in their local industrial environments. First are externalities from other plants in the same industry locally, usually called localization economies or, in a dynamic context, Marshall, Arrow, Romer [MAR] economies. Second are externalities from the scale or diversity of local economic activity outside the own industry involving some type of cross- fertilization, usually called urbanization economies or, in a dynamic context, Jacobs economies. Estimating production functions for plants in high tech industries and in capital goods, or machinery industries, I find that local own industry scale externalities, as measured specifically by the count of other own industry plants locally, have strong productivity effects in high tech but not machinery industries. I find evidence that single plant firms both benefit more from and generate greater external benefits than corporate plants. On timing, I find evidence that high tech single plant firms benefit from the scale of past own industry activity, as well as current activity. I find no evidence of urbanization economies from the diversity of local economic activity outside the own industry and limited evidence of urbanization economies from the overall scale of local economic activity.View Full Paper PDF
-
Working PaperA Note on the Locational Determinants of the Agricultural Supply Chain
July 2021
Working Paper Number:
CES-21-16
Over the past several decades, an increasing share of the agricultural supply chain is located beyond the farmgate, implying that some set of economic factors are influencing the location decisions of food and agricultural establishments. We explore the location decisions of several food and agricultural industries for employer and non-employer establishments by expanding on the empirical implications of Carpenter et al. (2021)'s demand threshold models. While Carpenter et al. (2021) focus on methods to estimate these industries' demand thresholds using restricted access data, we focus on expanding the interpretations of their empirical research and explore additional industries along the agricultural supply chain using their refined methods. Results highlight the influential role of the Land Grant University system for specific establishment types, the importance of diverse industries within local economies, and the changing rurality of the agricultural supply chain.View Full Paper PDF
-
Working PaperReturns to Scale in Small and Large U.S. Manufacturing Establishments
September 1990
Working Paper Number:
CES-90-11
The objective of this study is to assess the possibility of differences in the production technologies between large and small establishments in five selected 4-digit SIC manufacturing industries. We particularly focus on estimating returns to scale and then make interferences regarding the efficiency of small businesses relative to large businesses. Using cross-section data for two census years, 1977 and 1982, we estimate a transcendental logarithmic (translog) production model that provides direct estimates of economies of scale parameters for both small and large establishments. Our primary findings are: (i) there are significant differences in the production technologies between small and large establishments; and (ii) based on the scale parameter estimates, small establishments appear to be as efficient as large establishments under normal economic conditions, suggesting that large size is not a necessary condition for efficient production. However, small establishments seem to be unable to maintain constant returns to scale production during economic recession such as that in 1982.View Full Paper PDF
