Sectoral Spillovers and the Price of Land. A Cost Analysis

If firms and workers are free to move within a country, they will choose to locate in areas where local attributes enhance their productivity. In equilibrium, however, differences in local productivity should be offset by higher local prices. In this paper, I estimates both local sectoral cost functions in the panel of US states for 1969-1992 and across MSAs in 1990, and rent and wage hedonic equations for individual households and workers to study, first, what determines different productivity adavatages across areas and, second, the extent to which productivity gains from local attributes vary across sectors.