The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection

Loading...
Thumbnail Image
Penn collection
Real Estate Papers
Degree type
Discipline
Subject
agglomeration
firm selection
productivity
cities
Economics
Real Estate
Funder
Grant number
License
Copyright date
Distributor
Related resources
Author
Combes, Pierre-Philippe
Duranton, Gilles
Gobillon, Laurent
Puga, Diego
Roux, Sébastien
Contributor
Abstract

Firms are more productive, on average, in larger cities. Two main explanations have been offered: firm selection (larger cities toughen competition, allowing only the most productive to survive) and agglomeration economies (larger cities promote interactions that increase productivity), possibly reinforced by localized natural advantage. To distinguish between them, we nest a generalized version of a tractable firm selection model and a standard model of agglomeration. Stronger selection in larger cities left-truncates the productivity distribution, whereas stronger agglomeration right-shifts and dilates the distribution. Using this prediction, French establishment-level data, and a new quantile approach, we show that firm selection cannot explain spatial productivity differences. This result holds across sectors, city size thresholds, establishment samples, and area definitions.

Advisor
Date Range for Data Collection (Start Date)
Date Range for Data Collection (End Date)
Digital Object Identifier
Series name and number
Publication date
2012-11-01
Journal title
Econometrica
Volume number
Issue number
Publisher
Publisher DOI
Journal Issue
Comments
Recommended citation
Collection