Clusters, Agglomeration, and Economic Development Potential: Empirical Evidence Based on the Advent of Slab Casting by U.S. Steel Minimills

Abstract

Ten new steel plants were constructed in the United States from 1989 to 2001, each taking advantage of new steel slab casting technologies that gave scrap-based minimills access to the flat-products market. This market had been served previously exclusively by ore-based integrated mills. Some of the new minimills were built in established steel industry agglomerations. Others were built in greenfield locations with little or no prior steelmaking activity. This research, based on direct observation and plant visits, brings new evidence to bear on the nature and importance of agglomeration economies associated with steel production by analyzing industry clusters related to the advent of slab casting by steel minimills. The authors find that industry clusters can play an important role in the process of market entry; however, certain product and firm characteristics can shape the nature of industry agglomerations and their effect on firms and regions.

Reallocation and Technology: Evidence from the U.S. Steel Industry

“… See Hoerr (1988) -and in particular, page 16 -for evidence of the role of unionization on wages for VI and MM producers.8Giarratani, Gruver, and Jackson (2007) discuss the entry of Minimills into the production of sheet products around 1990.9 We have taken care to deflate these price indices by the GDP deflator to show price trends for steel relative to the rest of the economy.…”

Labor in the Twenty-First Century: The Top 0.1% and the Disappearing Middle-Class

“…In the 1980s, the minimills only had the technological capability to manufacture long products such as bars and rails, but, led by Nucor, the introduction of compact strip-production technology in 1989 enabled the minimills to compete with integrated mills in flat products such as plates and sheets as well. 19 The most perilous, but ultimately successful, U.S. response to Japanese competition was in the semiconductor industry. By the middle of the 1980s, the Japanese had used their integrated skill bases to lower defects and raise yields in the production of memory integrated circuits, transforming one of the most revolutionary technologies in history into mass-produced goods known as "commodity chips."…”

Project-Based Industries and Craft-Like Production: Structure, Location, and Performance

“…The micro-foundations of Marshall's conception of externalities are rooted in the economics of atomistic markets in which individual firms have little independent influence on the formation of clusters and the development of the collective externalities of districts. Yet many modern districts are dominated by large firms, or by collective organizations (business associations of small firms, trade unions, and education and training institutions), that have considerable market power to shape local externalities (Giarratani, Gruver, and Jackson, 2007;Lundequist and Power, 2002;Doeringer, Evans, Terkla, 2002). Yet we know little about how strategic conduct and economic power affects clustering or the formation of district externalities.…”