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

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2016-08

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Center for International Development at Harvard University
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Diodato, Dario, Frank Neffke, and Neave O’Clery. “Agglomeration Economies: The Heterogeneous Contribution of Human Capital and Value Chains.” CID Research Fellow and Graduate Student Working Paper Series 2016.76, Harvard University, Cambridge, MA, August 2016.

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Abstract

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-speci c benefi ts of sharing labor needs and supply links with local rms. 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.

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