What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns

Glenn Ellison, Edward L. Glaeser, William Kerr

NBER Working Paper No. 13068
Issued in April 2007
NBER Program(s):   PE

Many industries are geographically concentrated. Many mechanisms that could account for such agglomeration have been proposed. We note that these theories make different predictions about which pairs of industries should be coagglomerated. We discuss the measurement of coagglomeration and use data from the Census Bureau's Longitudinal Research Database from 1972 to 1997 to compute pairwise coagglomeration measurements for U.S. manufacturing industries. Industry attributes are used to construct measures of the relevance of each of Marshall's three theories of industry agglomeration to each industry pair: (1) agglomeration saves transport costs by proximity to input suppliers or final consumers, (2) agglomeration allows for labor market pooling, and (3) agglomeration facilitates intellectual spillovers. We assess the importance of the theories via regressions of coagglomeration indices on these measures. Data on characteristics of corresponding industries in the United Kingdom are used as instruments. We find evidence to support each mechanism. Our results suggest that input-output dependencies are the most important factor, followed by labor pooling.

download in pdf format
   (430 K)

email paper

This paper is available as PDF (430 K) or via email.

Machine-readable bibliographic record - MARC, RIS, BibTeX

Document Object Identifier (DOI): 10.3386/w13068

Published: Glenn Ellison & Edward L. Glaeser & William R. Kerr, 2010. "What Causes Industry Agglomeration? Evidence from Coagglomeration Patterns," American Economic Review, American Economic Association, vol. 100(3), pages 1195-1213, June. citation courtesy of

Users who downloaded this paper also downloaded these:
Glaeser and Gottlieb w14806 The Wealth of Cities: Agglomeration Economies and Spatial Equilibrium in the United States
Ellison and Glaeser w4840 Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach
Greenstone, Hornbeck, and Moretti w13833 Identifying Agglomeration Spillovers: Evidence from Million Dollar Plants
Dumais, Ellison, and Glaeser w6270 Geographic Concentration as a Dynamic Process
Glaeser Introduction to "Agglomeration Economics"
NBER Videos

National Bureau of Economic Research, 1050 Massachusetts Ave., Cambridge, MA 02138; 617-868-3900; email:

Contact Us