IDEAS home Printed from https://ideas.repec.org/a/sls/ipmsls/v32y20179.html
   My bibliography  Save this article

The Role of Urban Agglomerations for Economic and Productivity Growth

Author

Listed:
  • Rudiger Ahrend

    ()

  • Alexander Lembcke

    ()

  • Abel Schumann

    ()

Abstract

This article discusses how urban agglomerations – cities – affect economic productivity. It uses an internationally harmonized definition of cities that aims to capture the true extent of an urban agglomeration and is not limited by administrative city boundaries. It shows that labour productivity increases with city size. Among OECD metropolitan areas, agglomerations with more than 500,000 inhabitants, a 1 per cent population increase is associated with a 0.12 per cent increase in average labour productivity. Partly, this is explained by “sorting” as more productive workers tend to live in bigger cities. But bigger cities provide additional “agglomeration economies” to those working in them. Comparable workers are 0.02-0.05 per cent more productive in cities with a 1 per cent larger population. These differences compound to significant differentials, e.g. a similar worker in Madrid (6 million inhabitants) is, on average, nearly 15 per cent more productive than a worker in Toledo (120,000 inhabitants). Furthermore, the paper also shows that cities affect economic performance beyond their boundaries. Since 1995, per capita GDP growth in regions within 90 minutes driving of a large urban agglomeration has been approximately 0.4 percentage points higher than in those with no large urban agglomeration within 300 minutes of driving.

Suggested Citation

  • Rudiger Ahrend & Alexander Lembcke & Abel Schumann, 2017. "The Role of Urban Agglomerations for Economic and Productivity Growth," International Productivity Monitor, Centre for the Study of Living Standards, vol. 32, pages 161-179, Spring.
  • Handle: RePEc:sls:ipmsls:v:32:y:2017:9
    as

    Download full text from publisher

    File URL: http://www.csls.ca/ipm/32/Ahrend_Lembcke_Shumann.pdf
    Download Restriction: no

    References listed on IDEAS

    as
    1. Andini, Monica & de Blasio, Guido & Duranton, Gilles & Strange, William C., 2013. "Marshallian labour market pooling: Evidence from Italy," Regional Science and Urban Economics, Elsevier, vol. 43(6), pages 1008-1022.
    2. Dora L. Costa & Matthew E. Kahn, 2000. "Power Couples: Changes in the Locational Choice of the College Educated, 1940–1990," The Quarterly Journal of Economics, Oxford University Press, vol. 115(4), pages 1287-1315.
    3. 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.
    4. Ellison, Glenn & Glaeser, Edward L, 1997. "Geographic Concentration in U.S. Manufacturing Industries: A Dartboard Approach," Journal of Political Economy, University of Chicago Press, vol. 105(5), pages 889-927, October.
    5. Evert Meijers & Martijn Burger & Roberto Camagni & Roberta Capello & Andrea Caragliu, 2016. "Static vs. dynamic agglomeration economies. Spatial context and structural evolution behind urban growth," Papers in Regional Science, Wiley Blackwell, vol. 95(1), pages 133-158, March.
    6. Jorge De La Roca & Diego Puga, 2017. "Learning by Working in Big Cities," Review of Economic Studies, Oxford University Press, vol. 84(1), pages 106-142.
    7. Pierre-Philippe Combes & Gilles Duranton & Laurent Gobillon, 2011. "The identification of agglomeration economies," Journal of Economic Geography, Oxford University Press, vol. 11(2), pages 253-266, March.
    8. Roberto Camagni & Roberta Capello & Andrea Caragliu, 2015. "The Rise of Second-Rank Cities: What Role for Agglomeration Economies?," European Planning Studies, Taylor & Francis Journals, vol. 23(6), pages 1069-1089, June.
    9. Andersson, Fredrik & Burgess, Simon & Lane, Julia I., 2007. "Cities, matching and the productivity gains of agglomeration," Journal of Urban Economics, Elsevier, vol. 61(1), pages 112-128, January.
    10. Rudiger Ahrend & Alexander Lembcke, 2016. "Does It Pay to Live in Big(ger) Cities?: The Role of Agglomeration Benefits, Local Amenities, and Costs of Living," OECD Regional Development Working Papers 2016/9, OECD Publishing.
    11. Rudiger Ahrend & Emily Farchy & Ioannis Kaplanis & Alexander Lembcke, 2014. "What Makes Cities More Productive? Evidence on the Role of Urban Governance from Five OECD Countries," OECD Regional Development Working Papers 2014/5, OECD Publishing.
    12. Rudiger Ahrend & Abel Schumann, 2014. "Does Regional Economic Growth Depend on Proximity to Urban Centres?," OECD Regional Development Working Papers 2014/7, OECD Publishing.
    Full references (including those not matched with items on IDEAS)

    Citations

    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. China: Mao Strikes Back
      by Steve Cecchetti and Kim Schoenholtz in Money, Banking and Financial Markets on 2019-01-28 14:10:43

    More about this item

    Keywords

    Productivity; OECD; Policies; Global Productivity; Total Factor Productivity; Wages; academics; urban; population;

    JEL classification:

    • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • P42 - Economic Systems - - Other Economic Systems - - - Productive Enterprises; Factor and Product Markets; Prices

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:sls:ipmsls:v:32:y:2017:9. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CSLS). General contact details of provider: http://edirc.repec.org/data/cslssca.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.