Bruce Domazlicky
Southeast Missouri State University
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The Retail Trade Sector in the U.S.
Agglomeration Economies
Efficiency and Productivity Growth
Model
Model Results
Relationship between Agglomeration
Economies & Efficiency
Relationship between Agglomeration
Economies & Productivity Growth
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Important Contributor to Standard of Living in
an Urban Area
Supplies Goods & Services that Residents
Demand
Important Source of Jobs to Urban Residents
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Computerization: Bar Scanning Universal in
U.S.
Improved Inventory Tracking
Increased Average Size of Retail
Establishments
Increased Concentration in Urban Areas at
expense of Rural Areas
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Localization Economies: economies that arise
when firms in the same industry locate near
each other: pooling of labor force,
development of industry suppliers, diffusion
of ideas (technological spillovers)
Urbanization Economies: economies that
arise from locating in an urban area: access
to markets, labor supply, financial and other
specialized services, low communication
costs
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Does efficiency in the retail trade sector
increase with urban size?
Does productivity growth in the retail trade
sector increase with urban size?
What is relationship between agglomeration
economies and efficiency in the retail trade
sector?
What is relationship between agglomeration
economies and productivity growth in the
retail trade sector?
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Data Envelopment Analysis is used to
measure efficiency levels
Productivity Growth is measured using the
Malmquist Productivity Index
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348 Metropolitan Statistical Areas in U.S.
3 Variables: Output, Labor, Capital
Output and Labor from the Bureau of
Economic Analysis:
Http://www.bea.gov
Capital computed using variation on method
by Garofalo and Yamarik (REStat, 2002)
Table 1. Variable Statistics
Variable
Output
(millions)
Labor
Capital
(billions)
Mean
Std. Deviation
Maximum
Minimum
1865.217
4497.217
52536.429
107.286
42892.146
89281.836
977328
4491
1.641
4.223
46.069
0.066
Table 2. Efficiency Estimates
Year
Mean
Std. Deviation
Minimum
Maximum
2001
0.7137
0.0961
0.4444
1
2002
0.7366
0.0938
0.4878
1
2003
0.7201
0.0900
0.4415
1
2004
0.7006
0.0919
0.4249
1
2005
0.6995
0.0977
0.4103
1
2006
0.6939
0.0984
0.4185
1
2007
0.6781
0.0938
0.4101
1
All 7 Years
0.7061
0.0909
0.4339
1
Table 4. Average Efficiency by Region
Region
Average Efficiency
New England
0.7272
Mid-Atlantic
0.6869
Great Lakes
0.6892
Plains
0.6448
Southeast
0.7280
Southwest
0.6797
Rocky Mountain
0.6784
Far West
0.7556
Table 6. Average Efficiency Scores by Metropolitan Size
Size
Average Efficiency Score
Number
Less than 100,000
0.6626
23
100,001-200,000
0.6695
133
200,001-500,000
0.7081
102
500,001-1,000,000
0.7353
45
1,000,001-2,000,000
0.7789
21
More than 2,000,000
0.8230
24
Table 3. Productivity Estimates, 2001-2007
Productivity
Mean
Std. Deviation
Minimum
Maximum
TFP Growth
Rate
1.2530
0.0951
1.0173
1.8110
Efficiency
Change
0.9524
0.0732
0.7644
1.3878
Technical
Change
1.3159
0.0252
1.2187
1.3633
Table 5. Average Productivity Growth by Region
Region
TFP
Efficiency Change
Technical Change
New England
1.2220
0.9208
1.3269
Mid-Atlantic
1.2599
0.9556
1.3188
Great Lakes
1.2024
0.9229
1.3038
Plains
1.2055
0.9195
1.3114
Southeast
1.2730
0.9687
1.3146
Southwest
1.2408
0.9312
1.3332
Rocky Mountain
1.3106
0.9910
1.3227
Far West
1.2774
0.9696
1.3174
Table 7. Average Productivity Growth by Metropolitan Size
Size
TFP Growth Rate
Efficiency Change
Technical Change
Less than 100,000
1.3272
1.0165
1.3057
100,001-200,000
1.2593
0.9587
1.3136
200,001-500,000
1.2518
0.9523
1.3150
500,001-1,000,000
1.2387
0.9394
1.3187
1,000,001-2,000,000
1.2276
0.9229
1.3301
More than 2,000,000
1.2010
0.9071
1.3243
Regression Results
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AVEEFF: Average Efficiency
URBAN: Urbanization Economies, log of
average population
LOCAL: Localization economies, relative share
of retail trade output
EDUC: Percentage of population with at least
a Bachelor’s Degree
Table 8. Efficiency Regression
Dependent Variable: AVEEFF
No. of Obs.: 348
Variable
Coefficient
Std. Error
t-Statistic
Constant
0.0684
0.0769
0.89
URBAN
0.0429
0.0042
10.23
LOCAL
0.0653
0.0216
3.03
EDUC
0.0022
0.0006
3.58
0.538
F-Statistic
8.77
Adj. R-Squared
Regression Results
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PROD: Productivity growth, 2001-2007
TC: Growth rate of technical change, 20012007
EC: Growth rate of efficiency change, 20012007
Table 9. Productivity Regressions
No. of Obs.: 348
(Numbers in parentheses are t-statistics.)
Variable
Constant
URBAN
LOCAL
EDUC
Adj. R-Squared
F-Statistic
PROD
1.4714
(13.86)
-0.0164
(-2.82)
0.0173
(0.66)
0.0007
(0.92)
0.24
3.11
TC
EC
1.2547
(62.76)
0.0048
(3.60)
0.0094
(1.22)
1.1681
(14.71)
-0.0162
(-3.63)
0.0060
(0.30)
0.0001
(0.75)
0.17
2.37
0.0003
(0.62)
0.21
2.80
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Efficiency in urban areas increase with city
size & relative importance of sector
Productivity change is due solely to technical
change
Efficiency change declines as urban size
increases-indication of “catching-up”?