The Productivity Advantages of Large Cities : Distinguishing Agglomeration from Firm Selection
Firms are more productive on average in larger cities. Two explanations have been offered:agglomeration economies (larger cities promote interactions that increase productivity) and firmselection (larger cities toughen competition allowing only the most productive to survive). Todistinguish between them, we nest a generalised version of a seminal firm selection model and astandard model of agglomeration. Stronger selection in larger cities left-truncates the productivitydistribution whereas stronger agglomeration right-shifts and dilates the distribution. We assess therelative importance of agglomeration and firm selection using French establishment-level dataand a new quantile approach. Spatial productivity differences in France are mostly explained byagglomeration.
Year of publication: |
2009
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Authors: | Combes, Pierre-Philippe COMBES ; Duranton, Gilles DURANTON ; Gobillon, Laurent GOBILLON ; Diego, Diego PUGA ; Roux, Sébastien ROUX |
Institutions: | Centre de Recherche en Économie et Statistique (CREST), Groupe des Écoles Nationales d'Économie et Statistique (GENES) |
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