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Cities, Matching and the Productivity Gains of Agglomeration

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Author Info
Andersson, Fredrik
Burgess, Simon
Lane, Julia

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Abstract

The 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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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 4598.

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Date of creation: Sep 2004
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Handle: RePEc:cpr:ceprdp:4598

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Related research
Keywords: agglomeration; matching; urban productivity;

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Find related papers by JEL classification:
J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
R23 - Urban, Rural, and Regional Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population

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References listed on IDEAS
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  3. Robert Shimer & Lones Smith, 2000. "Assortative Matching and Search," Econometrica, Econometric Society, vol. 68(2), pages 343-370, March.
    Other versions:
  4. John Haltiwanger & C J Krizan & Lucia Foster, 1998. "Aggregate Productivity Growth: Lessons From Microeconomic Evidence," Working Papers 98-12, Center for Economic Studies, U.S. Census Bureau. [Downloadable!]
    Other versions:
  5. Wheeler, Christopher H, 2001. "Search, Sorting, and Urban Agglomeration," Journal of Labor Economics, University of Chicago Press, vol. 19(4), pages 879-99, October. [Downloadable!] (restricted)
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  7. John C. Haltiwanger & Julia I. Lane & James R. Spletzer, 1999. "Productivity Differences across Employers: The Roles of Employer Size, Age, and Human Capital," American Economic Review, American Economic Association, vol. 89(2), pages 94-98, May. [Downloadable!] (restricted)
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  12. Michael Kremer & Eric Maskin, 1996. "Wage Inequality and Segregation," Harvard Institute of Economic Research Working Papers 1777, Harvard - Institute of Economic Research.
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  15. Enrico Moretti, 2003. "Human Capital Externalities in Cities," NBER Working Papers 9641, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. R. Jason Faberman, 2007. "The relationship between the establishment age distribution and urban growth," Working Papers 07-18, Federal Reserve Bank of Philadelphia. [Downloadable!]
  2. Antonio Cabrales & Antoni Calvó-Armengol & Yves Zenou, 2009. "Social Interactions and Spillovers: Incentives,Segregation and Topology," Working Papers 2009-06, FEDEA. [Downloadable!]
  3. Sherrill Shaffer & Iftekhar Hasan & Mingming Zhou, 2008. "New Small Firms And Dimensions Of Economic Performance," CAMA Working Papers 2008-24, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
    Other versions:
  4. Miles Finney, 2006. "An Empirical Test of Urban Labor Matching," ERSA conference papers ersa06p372, European Regional Science Association. [Downloadable!]
  5. Sherrill Shaffer & Robert N. Collender, 2008. "Rural Economic Performance And Federal Credit Programs," CAMA Working Papers 2008-26, Australian National University, Centre for Applied Macroeconomic Analysis. [Downloadable!]
  6. Gerald Carlino & Satyajit Chatterjee & Robert Hunt, 2006. "Urban density and the rate of invention," Working Papers 06-14, Federal Reserve Bank of Philadelphia. [Downloadable!]
    Other versions:
  7. Candau, Fabien, 2006. "The Spatial and Public Economics of Regions, a Theoretical and Empirical Survey," MPRA Paper 1153, University Library of Munich, Germany. [Downloadable!]
  8. Hoyt Bleakley & Jeffrey Lin, 2007. "Thick-market effects and churning in the labor market: evidence from U.S. cities," Working Papers 07-23, Federal Reserve Bank of Philadelphia. [Downloadable!]
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