Have Changes in Localization Economies Been Responsible for Declining Productivity Advantages in Large Cities?*

This paper investigates whether economies of urbanization and localization changed in two‐digit manufacturing industries over the period 1967‐1977. Estimates of changes in such economies indicate that the localization advantages of large industries declined in several industries, but that urbanization advantages increased for a small number of industries and decreased for a small number. Moreover, the absolute change in two‐digit industry employment tends to be negatively correlated with industry size, city size held constant, and positively associated with city size, industry size held constant. These latter findings tend to support the findings regarding changes in external economies.