States, localities, and countries compete aggressively to attract or retain manufacturing plants by offering companies sizable tax breaks and subsidies. This practice is generally presumed to be economical because the benefits from having these facilities-the "spillovers"-will be greater than the cost of the subsidies. When several competing firms locate in the same geographic area, an economically desirable cluster (or "agglomeration economy") is created, which has the potential to yield higher productivity for all the other firms in that cluster ("productivity spillovers"). Funds from this grant support the ongoing work of M.I.T. economists Daron Acemoglu and David Autor, who are studying the economic importance of these geographic clusters of manufacturing firms and the relationship between innovation and manufacturing within these clusters. Using data from the U.S. Census Bureau's Annual Survey of Manufacturers, Census of Manufacturers, and Economic Census, Acemoglu and Autor will investigate whether and how strongly the closing of U.S. manufacturing plants depresses the productivity of other manufacturing plants in the same geographic area.