publication . Article . 1999

Scale Economies and Industry Agglomeration Externalities: A Dynamic Cost Function Approach

Catherine J. Morrison Paul; Donald S Siegel;
Open Access
  • Published: 01 Jan 1999 Journal: American Economic Review, volume 89, issue 1 March, pages 272-290
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, especial...
free text keywords: jel:O47, jel:E23, Economics and Econometrics, Economies of agglomeration, Externality, Economies of scale, Economics, Microfoundations, Macroeconomics, Microeconomics, Aggregate productivity
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