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Productivity and the density of human capital

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  • Jaison R. Abel
  • Ishita Dey
  • Todd M. Gabe

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.

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Bibliographic Info

Paper provided by Federal Reserve Bank of New York in its series Staff Reports with number 440.

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Date of creation: 2010
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Handle: RePEc:fip:fednsr:440

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Keywords: Urban economics ; Labor productivity ; Labor market ; Population ; Demography;

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  1. Duranton, Gilles & Puga, Diego, 2003. "Microfoundations of Urban Agglomeration Economies," CEPR Discussion Papers 4062, C.E.P.R. Discussion Papers.
  2. Combes, Pierre-Philippe & Duranton, Gilles & Gobillon, Laurent, 2008. "Spatial wage disparities: Sorting matters!," Journal of Urban Economics, Elsevier, vol. 63(2), pages 723-742, March.
  3. Edward L. Glaeser & Albert Saiz, 2003. "The Rise of the Skilled City," NBER Working Papers 10191, National Bureau of Economic Research, Inc.
  4. Christopher H. Wheeler, 2004. "Wage inequality and urban density," Journal of Economic Geography, Oxford University Press, vol. 4(4), pages 421-437, August.
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  7. Michael Storper & Anthony J. Venables, 2003. "Buzz: Face-to-Face Contact and the Urban Economy," CEP Discussion Papers dp0598, Centre for Economic Performance, LSE.
  8. Edward L. Glaeser & Matthew E. Kahn, 2003. "Sprawl and Urban Growth," NBER Working Papers 9733, National Bureau of Economic Research, Inc.
  9. Jordan Rappaport, 2006. "A productivity model of city crowdedness," Research Working Paper RWP 06-06, Federal Reserve Bank of Kansas City.
  10. Gerald A. Carlino & Richard Voith, 1989. "Accounting for differences in aggregate state productivity," Working Papers 90-1, Federal Reserve Bank of Philadelphia.
  11. Melo, Patricia C. & Graham, Daniel J. & Noland, Robert B., 2009. "A meta-analysis of estimates of urban agglomeration economies," Regional Science and Urban Economics, Elsevier, vol. 39(3), pages 332-342, May.
  12. Enrico Moretti, 2002. "Estimating the Social Return to Higher Education: Evidence From Longitudinal and Repeated Cross-Sectional Data," NBER Working Papers 9108, National Bureau of Economic Research, Inc.
  13. Rappaport, Jordan, 2007. "Moving to nice weather," Regional Science and Urban Economics, Elsevier, vol. 37(3), pages 375-398, May.
  14. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-42, April.
  15. Carlino, Gerald A. & Chatterjee, Satyajit & Hunt, Robert M., 2007. "Urban density and the rate of invention," Journal of Urban Economics, Elsevier, vol. 61(3), pages 389-419, May.
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Cited by:
  1. Benos, Nikos & Karagiannis, Stelios, 2013. "Do Cross-Section Dependence and Parameter Heterogeneity Matter? Evidence on Human Capital and Productivity in Greece," MPRA Paper 53326, University Library of Munich, Germany.
  2. Todd M. Gabe & Jaison R. Abel, 2013. "Shared knowledge and the coagglomeration of occupations," Staff Reports 612, Federal Reserve Bank of New York.
  3. Gianmarco Ottaviano & Giovanni Peri, 2013. "New Frontiers Of Immigration Research: Cities And Firms," Journal of Regional Science, Wiley Blackwell, vol. 53(1), pages 1-7, 02.
  4. Jaison R. Abel & Richard Deitz, 2012. "Agglomeration and job matching among college graduates," Staff Reports 587, Federal Reserve Bank of New York.

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