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Abstract
Economic analysis of production processes and performance typically neglects
consideration of spatial and industry inter-dependencies that may affect economic
performance, although there is increasing theoretical recognition that such linkages may
be both substantive and expanding. In particular, thick market or agglomeration effects
may arise due to knowledge or other types of spillovers associated with own-industry
(horizontal), and supply-side or demand-driven (vertical), externalities. In this paper we
provide a conceptual and empirical framework for measuring and evaluating such
spillovers, which allows us both to quantify their cost-effects, and to evaluate their
contribution to location decisions. We focus on the U.S. food manufacturing sector, and
the spillovers that may occur across states within the sector and from agricultural
production (supply) and consumer buying power (demand). And we find substantive
total and marginal cost-impacts in both spatial and industry dimensions, which appear to
be motivating forces for regional concentration patterns of the U.S. food manufacturing
industries.