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Productivity and the density of human capital

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Author Info

  • Jaison R. Abel

    ()
    (Federal Reserve Bank of New York)

  • Ishita Dey

    ()
    (University at Buffalo)

  • Todd M. Gabe

    ()
    (University of Maine)

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 Institut d'Economia de Barcelona (IEB) in its series Working Papers with number 2010/30.

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Length: 46 pages
Date of creation: 2010
Date of revision:
Handle: RePEc:ieb:wpaper:2010/9/doc2010-30

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Keywords: Agglomeration; productivity; density; knowledge spillovers;

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References

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  1. Edward L. Glaeser & Albert Saiz, 2003. "The Rise of the Skilled City," Harvard Institute of Economic Research Working Papers 2025, Harvard - Institute of Economic Research.
  2. Jordan Rappaport, 2006. "A productivity model of city crowdedness," Research Working Paper RWP 06-06, Federal Reserve Bank of Kansas City.
  3. Giles Duranton & Diego Puga, 2003. "Micro-Foundations of Urban Agglomeration Economies," NBER Working Papers 9931, National Bureau of Economic Research, Inc.
  4. Moretti, Enrico, 2004. "Estimating the social return to higher education: evidence from longitudinal and repeated cross-sectional data," Journal of Econometrics, Elsevier, vol. 121(1-2), pages 175-212.
  5. Michael Storper & Anthony J. Venables, 2003. "Buzz: face-to-face contact and the urban economy," LSE Research Online Documents on Economics 20008, London School of Economics and Political Science, LSE Library.
  6. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon & Sébastien Roux, 2008. "Estimating Agglomeration Economies with History, Geology and Worker Effects," Working Papers 2008-22, Centre de Recherche en Economie et Statistique.
  7. Carlino, Gerald A. & Voith, Richard, 1992. "Accounting for differences in aggregate state productivity," Regional Science and Urban Economics, Elsevier, vol. 22(4), pages 597-617, November.
  8. Edward L. Glaeser & David C. Mare, 1994. "Cities and Skills," NBER Working Papers 4728, National Bureau of Economic Research, Inc.
  9. Edward L. Glaeser & Matthew E. Kahn, 2003. "Sprawl and Urban Growth," NBER Working Papers 9733, National Bureau of Economic Research, Inc.
  10. 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.
  11. Jordan Rappaport, 2004. "Moving to Nice Weather," Econometric Society 2004 North American Summer Meetings 188, Econometric Society.
  12. James H. Stock & Motohiro Yogo, 2002. "Testing for Weak Instruments in Linear IV Regression," NBER Technical Working Papers 0284, National Bureau of Economic Research, Inc.
  13. Gerald Carlino & Satyajit Chatterjee & Robert Hunt, 2006. "Urban density and the rate of invention," Working Papers 06-14, Federal Reserve Bank of Philadelphia.
  14. 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.
  15. 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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Cited by:
  1. 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.
  2. Jaison R. Abel & Richard Deitz, 2012. "Agglomeration and job matching among college graduates," Staff Reports 587, Federal Reserve Bank of New York.
  3. 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.
  4. Todd M. Gabe & Jaison R. Abel, 2013. "Shared knowledge and the coagglomeration of occupations," Staff Reports 612, Federal Reserve Bank of New York.

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