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Industry churning and the evolution of cities: Evidence for Germany

  • Findeisen, Sebastian
  • Südekum, Jens

In this paper we show that the recent model by Gilles Duranton [Duranton, G., 2007. Urban evolutions: The fast, the slow, and the still. American Economic Review 97, 197-221] 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 in urban economics about the determinants of local industry turnover so far. We present an empirical analysis of the excess churning index for West German cities, which describes the strength of intra-city industry reallocations over time. We find that urban growth and industry turnover are not notably correlated: Some, but not all fast-growing cities have notably changed. Secondly, human capital is positively related to growth and turnover, but only among successful cities. Industrial change within unsuccessful cities is driven by the disappearance of old-fashioned and declining sectors 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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Article provided by Elsevier in its journal Journal of Urban Economics.

Volume (Year): 64 (2008)
Issue (Month): 2 (September)
Pages: 326-339

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Handle: RePEc:eee:juecon:v:64:y:2008:i:2:p:326-339
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/622905

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  1. Pierre-Philippe Combes & Thierry Magnac & Jean-Marc Robin, 2004. "The dynamics of local employment in France," Working Papers 155391, Institut National de la Recherche Agronomique, France.
  2. Grossman, Gene M & Helpman, Elhanan, 1991. "Quality Ladders in the Theory of Growth," Review of Economic Studies, Wiley Blackwell, vol. 58(1), pages 43-61, January.
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  9. 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.
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  11. Glaeser, E.L. & Scheinkman, J.A., 1993. "Economic Growth in a Cross-Section of Cities," Harvard Institute of Economic Research Working Papers 1645, Harvard - Institute of Economic Research.
  12. 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.
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  14. Gabaix, Xavier & Ioannides, Yannis M., 2004. "The evolution of city size distributions," Handbook of Regional and Urban Economics, in: J. V. Henderson & J. F. Thisse (ed.), Handbook of Regional and Urban Economics, edition 1, volume 4, chapter 53, pages 2341-2378 Elsevier.
  15. 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.
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