Abstract: While the clustering of people can raise productivity through social interactions, social divisions such as ethnic segregation and tension may limit these benefits. I study how such divisions shape the gains from agglomeration, leveraging an ethnic-based resettlement program in 1950s British Malaya that forcibly relocated 600,000 rural Chinese into villages across the country. I find that areas with higher resettlement remained more densely populated and had higher Chinese population shares decades later, driven by both the program and subsequent migration. Moreover, these areas were wealthier and more industrialized, with greater labor market specialization. However, the economic benefits were concentrated among the Chinese population. Other ethnic groups saw only marginal gains when employed outside agriculture. Evidence suggests that segregation and deeper cultural and linguistic barriers hindered cross-ethnic spillovers. To evaluate the aggregate effects of resettlement, I estimate a quantitative spatial model allowing agglomeration externalities to vary by sector and ethnic composition. While resettlement raised total output, the economic gains did not outweigh the welfare losses from forced relocation.
Abstract: We examine barriers to technology adoption, drawing on the diffusion of steam power in US mills. Improvements in steam power generated greater relative growth in counties with less waterpower potential. Steam adoption was largely driven by entrants, with limited incumbent switching. Switching barriers continued to slow technology diffusion, despite entry and exit, because many smaller entrants opened with waterpower and then themselves became locked-in incumbents. We estimate a dynamic model of entry and technology adoption to quantify the delay in aggregate technology diffusion from this “recurring lock-in,” and corresponding losses in aggregate efficiency due to positive externalities in technology adoption.