Working Papers

2013

 

April 2013, No. 13-04

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

Luis Cabral, Zhu Wang and Daniel Yi Xu

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.

NBER Working Paper version (subscription required): http://www.nber.org/papers/w18973

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