Networking off Madison Avenue

Abstract

This paper studies the advertising agency industry in Manhattan to infer networking benefits among agencies in close spatial proximity. We use economic census data that allow us to distinguish locations at a fine level of geographic detail, so as to infer the strong effect on productivity of having more near advertising agency neighbours. Paying close attention to identification issues, we show, however, that there is extremely rapid spatial decay in the benefits of more near neighbours, even in the close quarters of southern Manhattan, a finding that is new to the literature. This suggests that high density of similar commercial establishments is important in enhancing local productivity for those industries found in large cities, where information sharing plays a critical role. Our results indicate that the benefits of more near neighbours are largely capitalized into rents rather than wages, challenging an existing literature, which estimates wage equations alone to infer agglomeration benefits. Copyright © 2008 The Review of Economic Studies Limited.

Local Industrial Conditions and Entrepreneurship: How Much of the Spatial Distribution Can We Explain?

“…These patterns also hold in Figure 3b's depiction of the fraction of manufacturing …rms that are new entrants. 3 Jarmin and Miranda (2002) describe the construction of the LBD. Sectors not included in the LBD are agriculture, forestry and …shing, public administration, and private households.…”

“…Saxenian (1994) illustrates how the ‡ow of ideas helped to create the entrepreneurial cluster of Silicon Valley. Arzaghi and Henderson (2008) document the importance of networking for ad agencies in Manhattan. Glaeser and Kahn (2001) argue that the urbanization of high human-capital industries, like …nance, is evidence for the role that density plays in the transfer of ideas, and studies of patent citations highlight the importance of local proximity for scienti…c exchanges (e.g., Ja¤e et al 1993, Thompson and Fox-Kean 2005, Thompson 2006).…”

A non-parametric test for industrial specialization

“…To illustrate the difference between these two measures of industrial concentration, consider the advertising agency, which is described as heavily concentrated in Manhattan by Arzaghi and Henderson (2008). This industry is localized since the majority of establishments are highly concentrated.…”

Entry and Quality Choices in Child Care Markets

“…As is standard in the literature, we adopt Poisson estimation on a speci cation similar to (8), but using birth counts per district-year as the dependent variable (Guimarães, Figueiredo and Woodward, 2003;Arzaghi and Henderson, 2008). The results reported in column (1) show that the above ndings remain qualitatively unaltered when birth counts are used instead.…”