The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection
Year: 2012
Type: article
Abstract: Firms are more productive on average in larger cities. Two explanations have been offered: agglomeration economies (larger cities promote interactions that increase productivity) and firm selection (larger cities toughen competition allowing only the most productive to survive). To distinguish between them, we nest a generalised version of a seminal 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. We assess the relative importance of agglomeration and firm selection using French establishment level data and a new quantile approach. Spatial productivity differences in France are mostly explained by agglomeration.
Source: Econometrica
DOI: 10.3982/ecta8442
Authors: Pierre‐Philippe Combes, Gilles Duranton, Laurent Gobillon, Diego Puga, Sébastiên Roux
Institutions: Université de Lyon, Aix-Marseille Sciences Economiques, Centre for Economic Policy Research, University of Pennsylvania, London School of Economics and Political Science, Institut national d'études démographiques, Institut National de la Statistique et des Etudes Economiques, Centre de Recherche en Économie et Statistique, Paris Jourdan Sciences Economiques, Paris School of Economics, Centro de Estudios Monetarios y Financieros
Language: English
Subfield: Economics and Econometrics
Domain: Social Sciences
Open Access status: green
OpenAlex ID: W2145038697