Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach
- (pp. 272-290)
AbstractScale 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.
Citation1999. "Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach." American Economic Review, 89(1): 272-290. DOI: 10.1257/aer.89.1.272
- O47 Measurement of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
- E23 Macroeconomics: Production