Description: Virtual Department Seminar: Carlianne Patrick
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"Identifying Agglomeration Spillovers: New Evidence from Large Plant Openings"
Abstract: This paper uses confidential Census micro data to investigate the impact of incentivized plant openings on manufacturing activity in the same geographical area, thereby testing many of the economic theories about industrial agglomeration. We compare outcomes for plants in a county that “wins” a new plant (as reported by Site Selection and Good Jobs First) to plants in similar counties that did not receive the new plant. With this quasi-experimental design, we test three hypotheses related to industry clustering: 1) whether the plant opening generates positive externalities for incumbent firms; 2) whether incumbent plant productivity depends on the local density of incumbent firms in a non-linear way; and 3) whether the higher productivity due to a new plant results in a new and permanent equilibrium in area manufacturing shares, or is a transitory shock. These tests provide empirical evidence on whether policies incentivizing plant locations merit their costs as well as empirical evidence on the hypotheses central to economic theories used to justify local industrial policies. We find little evidence that the average highly incentivized large plant generates significant productivity spillovers and the data most strongly support a unique equilibrium in winning county-manufacturing shares. Release of additional results is pending disclosure review.

Contact Person: John Winters