Externalities and Industrial DevelopmentAbstractThe traditional industrial location literature assumes that firms locate in a community in response to changes in the current comparative advantages of different locations (see Herzog and Schlottmann, 1991, for a review). The existing pattern of location of firms in an industry thus depends on such things as current wages, population, industrial composition, utility prices, and tax rates of these localities. In contrast, a relatively new literature assumes that existing location patterns for an industry are strongly influenced by “history,” in particular the historical industrial environment of cities (Glaeser, Kallal, Scheinkman, and Schleifer, 1992; Henderson, Kuncoro, and Turner, 1992; Miracky, 1992). A related paper by Blanchard and Katz (1992) argues that State employment patterns follow a unit root process with drift. Thus a local pattern of growth or decline will persist over time, without “reversion to the mean.”Externalities and Industrial Development (*.pdf, 52 KB)
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