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Title:The productivity advantages of large cities: Distinguishing agglomeration from firm selection PDF Logo
Authors:Combes, Pierre-Philippe
Duranton, Gilles
Gobillon, Laurent
Puga, Diego
Roux, Sébastien
Issue Date:2012
Series/Report no.:Discussion Paper series, Forschungsinstitut zur Zukunft der Arbeit 6502
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 localised natural advantage. To distinguish between them, we nest a generalised 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.
Subjects:agglomeration
firm selection
productivity
cities
JEL:C52
R12
D24
Persistent Identifier of the first edition:urn:nbn:de:101:1-2012080812474
Document Type:Working Paper
Appears in Collections:IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)

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