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Title: Productivity and the Geographic Concentration of Industry: The Role of Plant Scale

Citation Type: Working Paper

Publication Year: 2004

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Abstract: A large body of research has established a positive connection between an industrys productivity and the magnitude of its presence within locally defined geographic areas. This paper examines the extent to which this relationship can be explained by a micro-level underpinning commonly associated with productivity: establishment scale. Looking at data on two-digit manufacturing across a sample of U.S. metropolitan areas, I find two primary results. First, average plant size defined in terms of numbers of workers increases substantially as an industrys employment in a metropolitan area rises. Second, results from a decomposition of localization effects on labor earnings into plant-size and plant-count components reveal that the widely observed, positive association between a workers wage and the total employment in his or her own metropolitan area-industry derives predominantly from the former, not the latter. Localization economies, therefore, appear to be the product of plant-level organization rather than pure population effects.

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Authors: Wheeler, Christopher H.

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Publication Number: 024A

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Data Collections: IPUMS USA

Topics: Other

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