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Why do industries coagglomerate? How Marshallian externalities differ by industry and have evolved over time

Diodato, D; Neffke, F; O’Clery, N; (2018) Why do industries coagglomerate? How Marshallian externalities differ by industry and have evolved over time. Journal of Urban Economics , 106 pp. 1-26. 10.1016/j.jue.2018.05.002. Green open access

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Abstract

The fact that firms benefit from close proximity to other firms with which they can exchange inputs, skilled labor or know-how helps explain why many industrial clusters are so successful. Studying the evolution of coagglomeration patterns, we show that which type of agglomeration benefits firms has drastically changed over the course of a century and differs markedly across industries. Whereas, at the beginning of the twentieth century, industries tended to colocate with their value chain partners, in more recent decades the importance of this channels has declined and colocation seems to be driven more by similarities industries’ skill requirements. By calculating industry-specific Marshallian agglomeration forces, we are able to show that, nowadays, skillsharing is the most salient motive in location choices of services, whereas value chain linkages still explain much of the colocation patterns in manufacturing. Moreover, the estimated degrees to which labor and input-output linkages are reflected in an industry’s coagglomeration patterns help improve predictions of city-industry employment growth.

Type: Article
Title: Why do industries coagglomerate? How Marshallian externalities differ by industry and have evolved over time
Open access status: An open access version is available from UCL Discovery
DOI: 10.1016/j.jue.2018.05.002
Publisher version: https://doi.org/10.1016/j.jue.2018.05.002
Language: English
Additional information: This version is the author accepted manuscript. For information on re-use, please refer to the publisher’s terms and conditions.
Keywords: Coagglomeration, Marshallian externalities, labor pooling, value chains, manufacturing, services, regional diversification
UCL classification: UCL
UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL BEAMS
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment
UCL > Provost and Vice Provost Offices > UCL BEAMS > Faculty of the Built Environment > Centre for Advanced Spatial Analysis
URI: https://discovery.ucl.ac.uk/id/eprint/10087067
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