Determinants of Industrial Coagglomeration and Establishment-level Productivity

This paper investigates the relationships between determinants of industrial coagglomeration and establishment-level productivity. For each pair of industries, we first construct the degree of coagglomeration and indices for three factors of coagglomeration: inter-firm transactions, knowledge spillovers, and labor market pooling. We then examine correlation between these three factors and the degree of coagglomeration. Overall, inter-firm transactions and labor market pooling are positively correlated with the degree of coagglomeration whereas knowledge spillovers have no significant relationship with coagglomeration. We also find that the determinants of coagglomeration are quite different across industries. Further, we examine the relationships between these factors and establishment-level productivity. We find that the determinants of coagglomeration are not necessarily positively associated with the productivity of establishments.