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Industry churning and the evolution of cities: Evidence for Germany

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  • Findeisen, Sebastian
  • Südekum, Jens

Abstract

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.

Suggested Citation

  • Findeisen, Sebastian & Südekum, Jens, 2008. "Industry churning and the evolution of cities: Evidence for Germany," Journal of Urban Economics, Elsevier, vol. 64(2), pages 326-339, September.
  • Handle: RePEc:eee:juecon:v:64:y:2008:i:2:p:326-339
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    Cited by:

    1. William R. Kerr, 2010. "Breakthrough Inventions and Migrating Clusters of Innovation," NBER Chapters,in: Cities and Entrepreneurship National Bureau of Economic Research, Inc.
    2. Wolfgang Dauth & Jens Suedekum, 2016. "Globalization and local profiles of economic growth and industrial change," Journal of Economic Geography, Oxford University Press, vol. 16(5), pages 1007-1034.
    3. Delgado, Mercedes & Porter, Michael E. & Stern, Scott, 2014. "Clusters, convergence, and economic performance," Research Policy, Elsevier, vol. 43(10), pages 1785-1799.
    4. Duranton, Gilles, 2010. "Urban Growth: Trends Vs. Noise," Revista Galega de Economía, University of Santiago de Compostela. Faculty of Economics and Business., vol. 19(ex).
    5. FU, Shihe & DONG, Xiaofang & CHAI, Guojun, 2010. "Industry specialization, diversification, churning, and unemployment in Chinese cities," China Economic Review, Elsevier, vol. 21(4), pages 508-520, December.
    6. Cuberes, David, 2011. "Sequential city growth: Empirical evidence," Journal of Urban Economics, Elsevier, vol. 69(2), pages 229-239, March.
    7. Rosenthal, Stuart S. & Ross, Stephen L., 2015. "Change and Persistence in the Economic Status of Neighborhoods and Cities," Handbook of Regional and Urban Economics, Elsevier.
    8. Duranton, Gilles & Puga, Diego, 2014. "The Growth of Cities," Handbook of Economic Growth,in: Handbook of Economic Growth, edition 1, volume 2, chapter 5, pages 781-853 Elsevier.
    9. Zenou, Yves, 2009. "Endogenous job destruction and job matching in cities," Journal of Urban Economics, Elsevier, vol. 65(3), pages 323-336, May.
    10. Ikeda, Kiyohrio & Onda, Mikihisa & Takayama, Yuki, 2017. "Bifurcation theory of a square lattice economy: Racetrack economy analogy in an economic geography model," MPRA Paper 78120, University Library of Munich, Germany.
    11. Glaeser, Edward L. & Rosenthal, Stuart S. & Strange, William C., 2010. "Urban economics and entrepreneurship," Journal of Urban Economics, Elsevier, vol. 67(1), pages 1-14, January.
    12. Gabriel M. Ahlfeldt & Arne Feddersen, 2010. "From periphery to core: economic adjustments to high speed rail," Working Papers 2010/38, Institut d'Economia de Barcelona (IEB).
    13. Gilles DURANTON, 2012. "La Croissance Urbaine : Déterminismes Vs Bruit," Region et Developpement, Region et Developpement, LEAD, Universite du Sud - Toulon Var, vol. 36, pages 11-30.

    More about this item

    Keywords

    Industry turnover Urban growth Structural change Churning City size distribution Zipf's law;

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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