Shipping Costs, Information Costs, and the Sources of Industrial Coagglomeration

Abstract

Direct trade between establishments, coupled with costs of trading goods and information across space, has long been considered a primary determinant of industrial colocation. However, researchers have had difficulty decomposing the effects of interindustry trade into these two cost components. Using new techniques for separately estimating shipping and information costs, this paper provides an empirical framework for identifying the various sources of industrial coagglomeration among U.S. manufacturing industries. My findings suggest that both interindustry shipping costs and information costs influence metropolitan‐level coagglomeration. Additional evidence points to the significant role of direct information costs in determining intraindustry agglomerations.