DP10673 Agglomeration Economies and Productivity Growth: U.S. Cities, 1880-1930

Author(s): Nicholas Crafts, Alexander Klein
Publication Date: June 2015
Keyword(s): agglomeration economies, industrial structure, Jacobian externalities, manufacturing productivity, Marshallian externalities
JEL(s): N91, N92, O7, R32
Programme Areas: Economic History
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=10673

We investigate the role of industrial structure in productivity growth in U.S. cities between 1880 and 1930 using a new dataset constructed from the Census of Manufactures. We find that increases in specialization were associated with faster productivity growth but that diversity only had positive effects on productivity performance in large cities. We interpret our results as providing strong support for the importance of Marshallian externalities. Industrial specialization increased considerably in U.S. cities in the early 20th century, probably as a result of improved transportation, and we estimate that this resulted in significant gains in labor productivity