Agglomeration Economies: The Heterogeneous Contribution of Human Capital and Value Chains

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We document the heterogeneity across sectors in the impact labor and input-output links have on industry agglomeration. Exploiting the available degrees of freedom in coagglomeration patterns, we estimate the industry-specic benefits of sharing labor needs and supply links with local firms. On aggregate, coagglomeration patterns of services are at least as strongly driven by input-output linkages as those of manufacturing, whereas labor linkages are much more potent drivers of coagglomeration in services than in manufacturing. Moreover, the degree to which labor and input-output linkages are reflected in an industry's coagglomeration patterns is relevant for predicting patterns of city-industry employment growth.

CID Research Fellow & Graduate Student Working Paper: 76
Keywords: Coagglomeration, Marshallian externalities, labor pooling, value chains, manufacturing, services, regional diversi cation
JEL Classification: J24, O14, R11
Last updated on 10/13/2016