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Industry Churning and the Evolution of Cities: Evidence for Germany

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Author Info
Sebastian Findeisen () (University of Konstanz)
Jens Suedekum () (University of Duisburg-Essen, University of Konstanz and IZA)

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Abstract

In this paper we show that the recent model by Duranton (AER, 2007) performs remarkably well in replicating the city size distribution of West Germany, much better than the simple rank-size rule known as Zipf’s law. The main mechanism of this theoretical framework is the "churning" of industries across cities. Little is known so far about the determinants of local industry turnover, however. We present an empirical analysis of the excess churning index for West German cities, which describes the strength of intra-city industry reallocations that has occurred over time. We find that human capital is a key driver of growth and local industrial change, but only among successful cities. Industrial change within unsuccessful cities is strongly driven by the disappearance of old-fashioned and declining industries such as agriculture or mining. On a more general level, our results suggest that the recent model by Duranton is a powerful description of the urban growth process. Still there are some aspects that are not captured by that model, which are at the core of other theories of urban growth.

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Publisher Info
Paper provided by Institute for the Study of Labor (IZA) in its series IZA Discussion Papers with number 3180.

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Length: 27 pages
Date of creation: Nov 2007
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Handle: RePEc:iza:izadps:dp3180

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Related research
Keywords: industry turnover; urban growth; structural change; churning; city size distribution; Zipf’s law;

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Find related papers by JEL classification:
O18 - Economic Development, Technological Change, and Growth - - Economic Development - - - Regional, Urban, and Rural Analyses
R11 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Analysis of Growth, Development, and Changes
R12 - Urban, Rural, and Regional Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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References listed on IDEAS
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. Eaton, Jonathan & Eckstein, Zvi, 1997. "Cities and growth: Theory and evidence from France and Japan," Regional Science and Urban Economics, Elsevier, vol. 27(4-5), pages 443-474, August. [Downloadable!] (restricted)
    Other versions:
  2. Duncan Black & Vernon Henderson, 1999. "A Theory of Urban Growth," Journal of Political Economy, University of Chicago Press, vol. 107(2), pages 252-284, April. [Downloadable!] (restricted)
  3. Esteban Rossi-Hansberg & Mark L. J. Wright, 2007. "Urban Structure and Growth," Review of Economic Studies, Blackwell Publishing, vol. 74(2), pages 597-624, 04. [Downloadable!] (restricted)
    Other versions:
  4. Henderson, Vernon & Kuncoro, Ari & Turner, Matt, 1995. "Industrial Development in Cities," Journal of Political Economy, University of Chicago Press, vol. 103(5), pages 1067-90, October. [Downloadable!] (restricted)
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  5. Gilles Duranton, 2007. "Urban Evolutions: The Fast, the Slow, and the Still," American Economic Review, American Economic Association, vol. 97(1), pages 197-221, March. [Downloadable!]
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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. William R. Kerr, 2009. "Breakthrough Inventions and Migrating Clusters of Innovation," NBER Working Papers 15443, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  2. Fu, Shihe & Dong, Xiaofang & Chai, Guojun, 2008. "Industry specialization, diversification, churning, and unemployment in Chinese cities," MPRA Paper 15339, University Library of Munich, Germany. [Downloadable!]
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