Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach
Catherine J. Morrison Paul
Donald S. Siegel
American Economic Review
no. 1, March 1999
Scale economies and agglomeration externalities are alleged to be important determinants of economic growth. To assess these effects, the authors outline and estimate a microfoundations model based on a dynamic cost function specification. This model provides for the separate identification of the impacts of externalities and cyclical utilization on short- and long-run scale economies and input substitution patterns. The authors find that scale economies are prevalent in U.S manufacturing; cost savings and scale effects often attributed to internal inputs may be due to external factors; and supply-side agglomeration effects are greater than demand-side, especially in the long run.
Morrison Paul, Catherine, J., and Donald S. Siegel.
"Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach."
American Economic Review,
Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence