Firm heterogeneity, technology adoption and the spatial distribution of population: Theory and measurement

This paper develops and estimates an economic geography model featuring firm heterogeneity and technology adoption. I derive statistics that measure the effect of a new technology on productivity, welfare and the spatial distribution of the population. The empirical application estimates these effects using 19th-century establishment-level data on steam power in the Canadian manufacturing sector and township-level population data. The results indicate that the introduction of steam power increased productivity by 22.9% and welfare by 4.9%. Comparing the model-predicted and observed township population growth, I find that steam power accounts for 6.2% of the variation in observed population growth during this period.