Koo, JunLall, Somik V.Chakravorty, Sanjoy2014-05-052014-05-052003-06https://hdl.handle.net/10986/18159How does economic geography influence industrial production and thereby affect industrial location decisions and the spatial distribution of development? For manufacturing industry, what are the externalities that matter, and to what extent? Are these externalities spatially localized? The authors answer these questions by analyzing the influence of economic geography on the cost structure of manufacturing firms by firm size for eight industry sectors in India. The economic geography factors include market access and local and urban externalities-which are concentrations of own-industry firms, concentrations of buyer-supplier links, and industrial diversity at the district (local) level. The authors find that industrial diversity is the only economic geography variable that has a significant, consistent, and substantial cost-reducing effect for firms, particularly small firms. This finding calls into question the fundamental assumptions regarding localization economies and raises further concerns on the industrial development prospects of lagging regions in developing countries.en-USCC BY 3.0 IGOENVIRONMENTAL ASPECTS OF ECONOMIC DEVELOPMENTINDUSTRIAL DEVELOPMENTGEOGRAPHIC VARIABLESINDUSTRIAL PRODUCTIONMANUFACTURING DEVELOPMENTECONOMIC GEOGRAPHYCOST OF PRODUCTION FACTORSMARKET ACCESSURBAN CONCENTRATIONINDUSTRIAL DIVERSIFICATIONLOCATION FACTORS ACCOUNTINGACCOUNTING PRINCIPLESBASIC METALSBOOK VALUECAPACITY BUILDINGCAPITAL GOODSCATCHMENT AREACOALCONSUMERSDEPRECIATIONECONOMETRIC ANALYSISECONOMIC ACTIVITYECONOMIC ANALYSISECONOMIC GEOGRAPHYECONOMIC GROWTHELASTICITIESELASTICITYEMPIRICAL ANALYSISEMPIRICAL RESEARCHEMPIRICAL STUDIESEMPLOYMENTEQUILIBRIUMEXTERNALITIESEXTERNALITYFACTOR DEMANDFIXED COSTSGROSS VALUEIMPERFECT COMPETITIONINCREASING RETURNSINCREASING RETURNS TO SCALEINPUT PRICESINTERMEDIATE GOODSINVENTORYLARGE CITIESMANUFACTURING INDUSTRYMETROPOLITAN AREASMONOPOLISTIC COMPETITIONOILPOLITICAL ECONOMYPOPULATION DENSITYPOSITIVE EFFECTSPRODUCERSPRODUCTION COSTSPRODUCTION FUNCTIONPRODUCTIVITYPROFIT MAXIMIZING FIRMSPROFITABILITYPURCHASING POWERTOTAL OUTPUTTRANSACTION COSTSTRANSPORTURBANIZATIONVALUABLE INFORMATIONVALUE ADDEDVECWAGESWELFARE EFFECTSACCOUNTINGLOCATION FACTORS10.1596/1813-9450-3072