NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Competitors, Complementors, Parents and Places: Explaining Regional Agglomeration in the U.S. Auto Industry

Luís Cabral, Zhu Wang, Daniel Yi Xu

NBER Working Paper No. 18973
Issued in April 2013
NBER Program(s):   IO   PR

Taking the early U.S. automobile industry as an example, we evaluate four competing hypotheses on regional industry agglomeration: intra-industry local externalities, inter-industry local externalities, employee spinouts, and location fixed-effects. Our findings suggest that inter-industry spillovers, particularly the development of the carriage and wagon industry, play an important role. Spinouts play a secondary role and only contribute to agglomeration at later stages of industry evolution. The presence of other firms in the same industry has a negligible (or maybe even negative) effect on agglomeration. Finally, location fixed-effects account for some agglomeration, though to a lesser extent than inter-industry spillovers and spinouts.

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