Agglomeration effects in Europe

The paper estimates agglomeration effects for France, Germany, Italy, Spain, and the UK. Estimation takes into account endogeneity of the spatial distribution of employment and spatial fixed effects. Empirical results suggest that agglomeration effects in these European countries are only slightly smaller than agglomeration effects in the US: the estimated elasticity of (average) labor productivity with respect to employment density is 4.5 percent compared to 5 percent in the US.