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The Impact of Globalization on Agglomeration: The Case of U.S. Manufacturing Employment from 1988 to 2003

This paper explores the impact of globalization on the micro-determinants of agglomeration, namely labor pooling (LP), goods pooling (GP), and idea pooling (IP). According to our estimates, LP now has a negative effect on employment agglomeration in U.S. manufacturing. More specifically, we find that trade liberalization is increasing the marginal effect of LP on employment agglomeration in U.S. manufacturing, but this positive effect is overwhelmed by the large negative effect of the ICT revolution. We also find that the ICT revolution is having substantial positive effect on the marginal effect of GP on employment agglomeration in U.S. manufacturing; whereas, trade liberalization has a negligible effect on the marginal effect of GP on employment agglomeration. Finally, we report evidence that internal economies of scale have a substantial effect on employment agglomeration in U.S. manufacturing.