What causes industry agglomeration?

Companies can set up shop in all sorts of locations. Why do they cluster in some places more than others? Do they want to … 1. get close to suppliers and customers to keep transport costs low? 2. be near a big labor pool? 3. benefit from intellectual spillovers? In this HIER discussion paper Glenn Ellison, Edward Glaeser, and William Kerr find evidence that supports all three, with one and two being most important.