Agglomeration Economies: Microdata Panel Estimates from Canadian Manufacturing

20 Pages Posted: 19 Dec 2010

See all articles by John R. Baldwin

John R. Baldwin

affiliation not provided to SSRN

W. Mark Brown

Statistics Canada

David L. Rigby

University of California, Los Angeles (UCLA) - Department of Geography

Date Written: December 2, 2010

Abstract

This paper identifies the main sources of urban increasing returns, after Marshall. The geographical distance across which externalities flow is also examined. We bring to bear on these questions plant level data organized in the form of a panel across the years 1989 and 1999. Plant level production functions are estimated across the Canadian manufacturing sector as a whole and for five broad industry groups, each characterized by the nature of its output. The panel data overcome selection bias resulting from unobserved plant level heterogeneity that is constant over time. A related set of estimates using instrumental variables allay persistent concerns with endogeneity. Results provide strong support for Marshall's claims about the importance of buyer/supplier networks, labor market matching and spillovers. We show that spillovers enhance plant productivity within industries rather than between them and that these spillovers are highly localized.

Suggested Citation

Baldwin, John R. and Brown, W. Mark and Rigby, David L., Agglomeration Economies: Microdata Panel Estimates from Canadian Manufacturing (December 2, 2010). Journal of Regional Science, Vol. 50, Issue 5, pp. 915-934, 2010, Available at SSRN: https://ssrn.com/abstract=1727914 or http://dx.doi.org/10.1111/j.1467-9787.2010.00675.x

John R. Baldwin

affiliation not provided to SSRN ( email )

W. Mark Brown

Statistics Canada ( email )

Ottawa, Ontario
Canada

David L. Rigby

University of California, Los Angeles (UCLA) - Department of Geography ( email )

Los Angeles, CA
United States

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