Cities, Matching and the Productivity Gains of Agglomeration
AbstractThe striking geographical concentration of economic activities suggests that there are substantial benefits to agglomeration. The nature of those benefits remains unclear, however. In this Paper we take advantage of a new dataset to quantify the role of one of the main contenders: the matching of workers and jobs. Using individual level data for two large US states we show that thicker urban labour markets are associated with more assortative matching between workers and firms. Another critical condition is required for this to generate higher productivity: complementarity of worker and firm quality in the production function. Using establishment level productivity regressions, we show that such complementarity is found in our data. Putting together the production and matching relationships, we show that production complementarity and assortative matching is an important source of the urban productivity premium.
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Bibliographic InfoPaper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4598.
Date of creation: Sep 2004
Date of revision:
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Other versions of this item:
- Andersson, Fredrik & Burgess, Simon & Lane, Julia I., 2007. "Cities, matching and the productivity gains of agglomeration," Journal of Urban Economics, Elsevier, vol. 61(1), pages 112-128, January.
- Fredrik Andersson & Simon Burgess & Julia Lane, 2004. "Cities, Matching and the Productivity Gains of Agglomeration," CEP Discussion Papers dp0648, Centre for Economic Performance, LSE.
- J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
- R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
- R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-02-13 (All new papers)
- NEP-EFF-2005-02-13 (Efficiency & Productivity)
- NEP-GEO-2005-02-13 (Economic Geography)
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