Abstract
This paper studies the sources of agglomeration economies in cities. We begin by incorporating within and cross-industry spillovers into a dynamic spatial equilibrium model in order to obtain a panel data estimating equation. This gives us a framework for measuring a rich set of agglomeration forces while controlling for a variety of potentially confounding effects. We apply this estimation strategy to detailed new data describing the industry composition of 31 English cities from 1851 to 1911. Our results show that industries grew more rapidly in cities where they had more local suppliers or other occupationally-similar industries. We find no evidence of dynamic within-industry effects, i.e., industries generally did not grow more rapidly in cities in which they were already large. Once we control for these agglomeration forces, we find evidence of strong dynamic congestion forces related to city size. We also show how to construct estimates of the combined strength of the many agglomeration forces in our model. These results suggest a lower bound estimate of the strength of agglomeration forces equivalent to a city-size divergence rate of 1.6–2.3% per decade.
Original language | English (US) |
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Pages (from-to) | 1-14 |
Number of pages | 14 |
Journal | Journal of Urban Economics |
Volume | 99 |
DOIs | |
State | Published - May 1 2017 |
Funding
We thank David Albouy, Pierre-Philippe Combes, Dora Costa, Don Davis, Jonathan Dingel, Gilles Duranton, Glenn Ellison, Ben Faber, Pablo Fajgelbaum, Edward Glaeser, Laurent Gobillon, Richard Hornbeck, Matt Kahn, Petra Moser, Alex Whalley and seminar participants at Columbia, UCLA, Harvard, UC Merced, UC San Diego, the NBER Innovation group, the NBER Urban Economics group, the CURE conference at Brown University, and the Urban Economics Association Annual Conference, for helpful comments and suggestions. Reed Douglas provided excellent research assistance. Funding for this project was provided by a grant from UCLA's Ziman Center for Real Estate and the National Science Foundation (CAREER grant no. 1552692).
Keywords
- Agglomeration
- City growth
ASJC Scopus subject areas
- Economics and Econometrics
- Urban Studies