Scale economies and industry agglomeration externalities: A dynamic cost function approach

Catherine J. Morrison Paul, Donald Siegel

Research output: Contribution to journalArticle

94 Citations (Scopus)

Abstract

Scale economies and agglomeration externalities are alleged to be important determinants of economic growth. To assess these effects, we 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. We 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, especially in the long run.

Original languageEnglish (US)
Pages (from-to)272-290
Number of pages19
JournalAmerican Economic Review
Volume89
Issue number1
StatePublished - Mar 1 1999

Fingerprint

Cost function
Externalities
Scale economies
Industry
Agglomeration
Microfoundations
Supply side
Cost savings
Input substitution
Manufacturing cost
Economic growth
Scale effect
External factors
Short-run

ASJC Scopus subject areas

  • Economics and Econometrics

Cite this

Scale economies and industry agglomeration externalities : A dynamic cost function approach. / Morrison Paul, Catherine J.; Siegel, Donald.

In: American Economic Review, Vol. 89, No. 1, 01.03.1999, p. 272-290.

Research output: Contribution to journalArticle

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