Agglomeration, production externalities, and the firm location decision

This dissertation investigates the industrial scope and geographic scale of manufacturing firm agglomeration economies in southern California and Brazil. Different types of production externality are expected to dominate as influences of firm location in Brazil, a rapidly developing country, and in southern California, a competitive, more-developed economy. Within the framework of localization and urbanization economies, I develop and employ analytical methods appropriate for each context.; Interindustry linkages should have a greater role in the location decisions of manufacturing firms confronting urbanization economies than would be the case for firms in similar industries confronting only localization economies. I identify 20 southern California industry clusters from principle components analysis of interindustry trade patterns and measure the spatial scale in which the trade linkages agglomerate within a polycentric framework. I find that southern California manufacturing industries cluster, for the most part, into large, diverse complexes of trading relationships, consistent with the workings of an urbanization economy.; The geographic scale of agglomeration differs considerably among southern California industry clusters, implying varying sources of production externality. Although geographic proximity is important to trade linkages, the diversity of interindustry linkages influences the scale in which an industry cluster concentrates less than the locations of its agglomerations. Clusters of numerous, diverse linkages concentrate exclusively in core locations while more specialized clusters with relatively few important linkages are sometimes centered in peripheral locations.; On the other hand, industry location in a developing country such as Brazil should be influenced more by benefits of localization than by the overall scale of the regional economy. From Generalized Linear Models, I estimate firm labor productivity attributable to localization, urbanization, and human development and find that firm output per worker is significantly higher in localized regions than in regions lacking a high concentration of employment in the particular industry for 11 of the 12 sectors studied. Only four industries with significant localization effects derive significantly higher benefits from locating in urbanized regions. Last, increased productivity in an urbanized region depends on high human development for three of the four sectors experiencing urbanization economies, a finding that is consistent with modern agglomeration theory.