DP17749 How Densely Do Manufacturing Establishments Occupy Land?
We construct a dataset on the size of parcels and on the footprint
of buildings occupied by manufacturing establishments in Canada. We
find that establishments in big cities and close to city centers occupy
their parcels more densely, both in terms of employment and building
footprint. Moreover, establishments with more employees use less land
per worker. These facts cannot be rationalized by a Cobb-Douglas production
function featuring land and labor as production factors. They
are, however, consistent with a modified-CES production function in
which land has a fixed cost component. The calibrated elasticity
of substitution between land—as measured by parcel size—and labor is
low (between 0.2 and 0.4).