Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/60842 
Year of Publication: 
2010
Series/Report no.: 
Staff Report No. 440
Publisher: 
Federal Reserve Bank of New York, New York, NY
Abstract: 
We estimate a model of urban productivity in which the agglomeration effect of density is enhanced by a metropolitan area's stock of human capital. Estimation accounts for potential biases due to the endogeneity of density and industrial composition effects. Using new information on output per worker for U.S. metropolitan areas along with a measure of density that accounts for the spatial distribution of population, we find that a doubling of density increases productivity by 2 to 4 percent. Consistent with theories of learning and knowledge spillovers in cities, we demonstrate that the elasticity of average labor productivity with respect to density increases with human capital. Metropolitan areas with a human capital stock one standard deviation below the mean realize no productivity gain, while doubling density in metropolitan areas with a human capital stock one standard deviation above the mean yields productivity benefits that are about twice the average.
Subjects: 
Agglomeration
productivity
density
knowledge spillovers
JEL: 
R12
R30
J24
O40
Document Type: 
Working Paper

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