Why do firms cluster near one another? We test Marshall's theories of industrial agglomeration by examining which industries locate near one another, or coagglomerate. We construct pairwise coagglomeration indices for US manufacturing industries from the Economic Census. We then relate coagglomeration levels to the degree to which industry pairs share goods, labor, or ideas. To reduce reverse causality, where collocation drives input-output linkages or hiring patterns, we use data from UK industries and from US areas where the two industries are not collocated. All three of Marshall's theories of agglomeration are supported, with input-output linkages particularly important. (JEL L14, L60, O33, R23, R32)

This study explores the importance of tacit knowledge transfer for international technology di¤usion by examining ethnic scienti…c communities in the US and their ties to their home countries. US ethnic research communities are quanti…ed by applying an ethnic-name database to individual patent records. International patent citations con…rm knowledge di¤uses through ethnic networks, and manufacturing output in foreign countries increases with an elasticity of approximately 0.3 to stronger scienti…c integration with the US frontier. To address reverse-causality concerns, reduced-form speci…cations exploit exogenous changes in US immigration quotas. Consistent with a model of sector reallocation, output growth in less developed economies is facilitated by employment gains, while more advanced economies experience sharper increases in labor productivity. The …ndings suggest tacit knowledge channels partly shape the e¤ective technology frontiers of developing economies.JEL Classi…cation: F22, J44, J61, O31, O32, O33, O41, O57.

This study evaluates the impact of high-skilled immigrants on US technology formation. We use reduced-form specifications that exploit large changes in the H-1B visa program. Higher H-1B admissions increase immigrant science and engineering (SE) employment and patenting by inventors with Indian and Chinese names in cities and firms dependent upon the program relative to their peers. Most specifications find limited effects for native SE employment or patenting. We are able to rule out displacement effects, and small crowding-in effects may exist. Total SE employment and invention increases with higher admissions primarily through direct contributions of immigrants.

Theory predicts that mandated employment protection may reduce productivity by distorting production choices. We use the adoption of wrongful-discharge protection by state courts in the US from 1970 to 1999 to evaluate the empirical link between dismissal costs and productivity. Drawing on establishment-level data from the Census Bureau, our estimates suggest that wrongful-discharge protection reduces employment flows and firm entry rates. Moreover, plants engage in capital deepening and experience a decline in total factor productivity, indicative of altered production techniques. Evidence of strong contemporaneous growth in employment, however, leads us to view our findings as suggestive but tentative.An extensive literature explores the impact of dismissal costs -also frequently called firing costs or employment protection -on the operation of labour markets. Beginning with the seminal work of Lazear (1990), much research has focused on assessing how dismissal costs affect employment levels. Theory suggests, however, that dismissal costs may have ambiguous effects on employment levels. Dismissal costs act as a tax on firing, which reduces dismissals but also reduces hiring. The net effect of these offsetting factors is ambiguous, at least in the short run. It is perhaps not surprising therefore that the empirical literature has found widely varying effects of dismissal costs on employment levels.By contrast, theory makes a clear prediction about the impact of dismissal costs on the efficiency of hiring and firing. Provided that dismissal protection is not undone by Coasean bargaining, dismissal protection raises firmsÕ adjustments costs. Consequently, firms will find it optimal not to hire workers whose short-term marginal product exceeds their market wage and will choose to retain unproductive workers whose wage exceeds their productivity (Blanchard and Portugal, 2001). These distortions in production choices unambiguously reduce worker flows. They are also likely to cause firms to substitute capital for labour and have the potential to reduce productivity by distorting production choices.

No abstract

The propagation of macroeconomic shocks through input-output and geographic networks can be a powerful driver of macroeconomic ‡uctuations. We …rst exposit that in the presence of Cobb-Douglas production functions and consumer preferences, there is a speci…c pattern of economic transmission whereby demand-side shocks propagate upstream (to input-supplying industries) and supply-side shocks propagate downstream (to customer industries) and that there is a tight relationship between the direct impact of a shock and the magnitudes of the downstream and the upstream indirect e¤ects. We then investigate the short-run propagation of four di¤erent types of industry-level shocks: two demand-side ones (the exogenous component of the variation in industry imports from China and changes in federal spending) and two supply-side ones (TFP shocks and variation in knowledge/ideas coming from foreign patenting). In each case, we …nd substantial propagation of these shocks through the input-output network, with a pattern broadly consistent with theory. Quantitatively, the network-based propagation is larger than the direct e¤ects of the shocks. We also show quantitatively large e¤ects from the geographic network, capturing the fact that the local propagation of a shock to an industry will fall more heavily on other industries that tend to collocate with it across local markets. Our results suggest that the transmission of various di¤erent types of shocks through economic networks and industry interlinkages could have …rst-order implications for the macroeconomy.JEL Classi…cation: E32.

The research program of the Center for Economic Studies (CES) produces a wide range of theoretical and empirical economic analyses that serve to improve the statistical programs of the U.S. Bureau of the Census. Many of these analyses take the form of CES research papers. The papers are intended to make the results of CES research available to economists and other interested parties in order to encourage discussion and obtain suggestions for revision before publication. The papers are unofficial and have not undergone the review accorded official Census Bureau publications. The opinions and conclusions expressed in the papers are those of the authors and do not necessarily represent those of the U.S. Bureau of the Census. Republication in whole or part must be cleared with the authors.

Many industries are geographically concentrated. Many mechanisms that could account for such agglomeration have been proposed. We note that these theories make different predictions about which pairs of industries should be coagglomerated. We discuss the measurement of coagglomeration and use data from the Census Bureau's Longitudinal Research Database from 1972 to 1997 to compute pairwise coagglomeration measurements for U.S. manufacturing industries. Industry attributes are used to construct measures of the relevance of each of Marshall's three theories of industry agglomeration to each industry pair:(1) agglomeration saves transport costs by proximity to input suppliers or final consumers, (2) agglomeration allows for labor market pooling, and (3) agglomeration facilitates intellectual spillovers. We assess the importance of the theories via regressions of coagglomeration indices on these measures. Data on characteristics of corresponding industries in the United Kingdom are used as instruments. We find evidence to support each mechanism. Our results suggest that input-output dependencies are the most important factor, followed by labor pooling. AbstractThis appendix provides additional details about the data employed in Ellison, Glaeser and Kerr (2007).