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Agglomeration: A Dynamic Approach

Author

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  • Walker Hanlon
  • Antonio Miscio
Abstract
This paper studies the sources of agglomeration economies in cities. We begin by introducing a simple dynamic spatial equilibrium model that incorporates spillovers within and across industries, as well as city-size effects. The model generates a dynamic panel-data estimation equation. We implement the approach using detailed new data describing the industry composition of 31 English cities from 1851-1911. We find that industries grow faster in cities where they have more local suppliers or other occupationally-similar industries. Industries do not grow more rapidly in locations in which they are already large, though there can be exceptions. Thus, dynamic agglomeration appears to be driven by cross-industry effects. Once we control for these cross-industry agglomeration effects, we find a strong negative relationship between city size and city-industry growth. This allows us to construct the first estimate of the aggregate strength of the cross-industry agglomeration forces. Our results suggest a lower bound estimate of the overall strength of agglomeration forces equivalent to a city-size divergence rate of 2.1-3.3 % per decade.

Suggested Citation

  • Walker Hanlon & Antonio Miscio, 2014. "Agglomeration: A Dynamic Approach," NBER Working Papers 20728, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:20728
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    Cited by:

    1. W. Walker Hanlon & Yuan Tian, 2015. "Killer Cities: Past and Present," American Economic Review, American Economic Association, vol. 105(5), pages 570-575, May.
    2. Rosenthal, Stuart S. & Ross, Stephen L., 2015. "Change and Persistence in the Economic Status of Neighborhoods and Cities," Handbook of Regional and Urban Economics, in: Gilles Duranton & J. V. Henderson & William C. Strange (ed.), Handbook of Regional and Urban Economics, edition 1, volume 5, chapter 0, pages 1047-1120, Elsevier.
    3. W. Walker Hanlon, 2016. "Coal Smoke and the Costs of the Industrial Revolution," NBER Working Papers 22921, National Bureau of Economic Research, Inc.
    4. Martin Fiszbein, 2017. "Agricultural Diversity, Structural Change and Long-run Development: Evidence from the U.S," NBER Working Papers 23183, National Bureau of Economic Research, Inc.
    5. W. Walker Hanlon, 2014. "Temporary Shocks and Persistent Effects in the Urban System: Evidence from British Cities after the U.S. Civil War," NBER Working Papers 20471, National Bureau of Economic Research, Inc.
    6. Ana Maria Bonomi Barufi, 2016. "Should I Stay Or Should I Go? Dynamic Agglomeration Economies In Brazil," Anais do XLIII Encontro Nacional de Economia [Proceedings of the 43rd Brazilian Economics Meeting] 164, ANPEC - Associação Nacional dos Centros de Pós-Graduação em Economia [Brazilian Association of Graduate Programs in Economics].
    7. Andrew Perumal, 2017. "42 Years of Urban Growth and Industry Composition," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 45(2), pages 133-147, June.
    8. W. Walker Hanlon, 2015. "Pollution and Mortality in the 19th Century," NBER Working Papers 21647, National Bureau of Economic Research, Inc.

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    More about this item

    JEL classification:

    • N9 - Economic History - - Regional and Urban History
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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