Conferences at Department of Economics, University of Toronto, RCEF 2012: Cities, Open Economies, and Public Policy

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Agglomeration Forces and Cluster Shapes

William Kerr, Scott D Kominers

Last modified: 2012-05-11

Abstract


We model spatial clusters of similar firms. Our model highlights how agglomerative forces lead to localized, individual connections among firms, while interaction costs generate a defined distance over which attraction forces operate. Overlapping firm interactions yield agglomeration clusters that are much larger than the underlying agglomerative forces themselves. Empirically, we demonstrate that our model's assumptions are present in the structure of technology and labor flows within Silicon Valley and its surrounding areas. Our model further identifies how the lengths over which agglomerative forces operate influence the shapes and sizes of industrial clusters; we confirm these predictions using variations across both technology clusters and industry agglomeration.

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