Papers in Evolutionary Economic Geography

August 29, 2016

# 16.26 Agglomeration economies: the heterogeneous contribution of human capital and value chains

Dario Diodato, Frank Neffke, Neave O’Clery

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We document the heterogeneity across sectors in the impact labor and input-output links have on industry agglomeration. Exploiting the available degrees of freedom in coagglomeration patterns, we estimate the industry-specific benefits of sharing labor needs and supply links with local firms. On aggregate, coagglomeration patterns of services are at least as strongly driven by input-output linkages as those of manufacturing, whereas labor linkages are much more potent drivers of coagglomeration in services than in manufacturing. Moreover, the degree to which labor and input-output linkages are reflected in an industry’s coagglomeration patterns is relevant for predicting patterns of city-industry employment growth.

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