The Geographic Concentration of Industry: Does Natural Advantage Explain Agglomeration?.

Scholars in many fields of economics have become very interested in Silicon Valley-style agglomeration of individual industries. These agglomerations are striking features of the economic landscape and may provide insightsinto the nature of the increasing returns technologies and spillovers that are tought by many to be behind endogenous growth and business cycles. In our previous work (1997), we noted that agglomerations may arise in two ways. In addition to explanations based on localized industry-specific spillovers, ther is a simpler alternnative : an industry will be agglomerated if firms locate in areas that have natural costs advantages.