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Estimating Agglomeration Economies with History, Geology, and Worker Effects

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Author Info
Combes, Pierre-Philippe
Duranton, Gilles
Gobillon, Laurent
Roux, Sébastien

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Abstract

Does productivity increase with density? We revisit the issue using French wage and TFP data. To deal with the ‘endogenous quantity of labour’ bias (i.e., urban agglomeration is consequence of high local productivity rather than a cause), we take an instrumental variable approach and introduce a new set of geological instruments in addition to standard historical instruments. To deal with the ‘endogenous quality of labour’ bias (i.e., cities attract skilled workers so that the effects of skills and urban agglomeration are confounded), we take a worker fixed-effect approach with wage data. We find modest evidence about the endogenous quantity of labour bias and both sets of instruments give a similar answer. We find that the endogenous quality of labour bias is quantitatively more important.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 6728.

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Date of creation: Feb 2008
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Handle: RePEc:cpr:ceprdp:6728

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Related research
Keywords: agglomeration economies; instrumental variables; TFP; wages;

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Find related papers by JEL classification:
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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(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. Martin, Philippe & Mayer, Thierry & Mayneris, Florian, 2008. "Spatial Concentration and Firm-Level Productivity in France," CEPR Discussion Papers 6858, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
  2. Gerald Carlino & Robert Hunt, 2009. "What explains the quantity and quality of local inventive activity?," Working Papers 09-12, Federal Reserve Bank of Philadelphia. [Downloadable!]
  3. Stephen Redding, 2009. "Economic Geography: A Review of the Theoretical and Empirical Literature," CEP Discussion Papers dp0904, Centre for Economic Performance, LSE. [Downloadable!]
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  4. Edward L. Glaeser & Joseph Gyourko & Albert Saiz, 2008. "Housing Supply and Housing Bubbles," NBER Working Papers 14193, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
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  5. Combes, Pierre-Philippe & Lafourcade, Miren & Thisse, Jacques-François & Toutain, Jean-Claude, 2008. "The Rise and Fall of Spatial Inequalities in France: a Long-Run Perspective," CEPR Discussion Papers 7017, C.E.P.R. Discussion Papers. [Downloadable!] (restricted)
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