Time-Varying Agglomeration Externalities in UK Counties between 1841 and 1971

Using dynamic panel data methods on UK counties (1841-1971), we investigate long-term employment dynamics in seven distinct local industries. We study how industries benefit from specialised environments (MAR), diverse local economies (Jacobs’) and large local markets (urbanization), and, in contrast to most other authors, test if the strength of MAR, Jacobs’ and urbanization externalities changes over time. We find declining MAR and rising Jacobs’ externalities since the mid-nineteenth century, questioning the adequacy of a static framework when studying agglomeration externalities