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The neighborhood or the region? Reassessing the density–wage relationship using geocoded data

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  • Johan Larsson

Abstract

I analyze the effects of sub-city-level density of economic activity on wages. Using a geocoded dataset on employment and wages in the city areas of Sweden, the analysis is based on squares representing “neighborhoods” ( $$0.0625\,\hbox {km}^{2})$$ 0.0625 km 2 ) , “districts” ( $$1\,\hbox {km}^{2})$$ 1 km 2 ) , and “agglomerations” ( $$10\,\hbox {km}^{2})$$ 10 km 2 ) . The wage-density elasticity depends on spatial resolution, with the elasticity being highest in neighborhood squares, where a doubling of density is associated with wage increases of 1.2 %, or roughly the size of the elasticity for region density. Moving from a mean-density neighborhood to the densest neighborhood would on average increase wages by 9 %. The results are consistent with (i) the existence of a localized density spillover effect and (ii) quite sharp attenuation of human capital spillovers. An implication of the findings is that if the data source is not sufficiently disaggregated, analyses of the density–wage link risk understating the benefits of working in dense parts of regions, such as the central business districts. Copyright Springer-Verlag Berlin Heidelberg 2014

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  • Johan Larsson, 2014. "The neighborhood or the region? Reassessing the density–wage relationship using geocoded data," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 52(2), pages 367-384, March.
  • Handle: RePEc:spr:anresc:v:52:y:2014:i:2:p:367-384
    DOI: 10.1007/s00168-014-0590-8
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    9. Andersson, Martin & Larsson, Johan P. & Wernberg, Joakim, 2017. "The Economic Microgeography of Diversity and Specialization," Working Paper Series 1167, Research Institute of Industrial Economics.
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    11. Ahfeldt, Gabriel M. & Pietrostefani, Elisabetta, 2017. "The compact city in empirical research: A quantitative literature review," LSE Research Online Documents on Economics 83638, London School of Economics and Political Science, LSE Library.
    12. Martin Andersson & Johan Klaesson & Johan P. Larsson, 2016. "How Local are Spatial Density Externalities? Neighbourhood Effects in Agglomeration Economies," Regional Studies, Taylor & Francis Journals, vol. 50(6), pages 1082-1095, June.
    13. Christian Rammer & Jan Kinne & Knut Blind, 2020. "Knowledge proximity and firm innovation: A microgeographic analysis for Berlin," Urban Studies, Urban Studies Journal Limited, vol. 57(5), pages 996-1014, April.
    14. Öner, Özge, 2014. "Retail Productivity: Investigating the Influence of Market Size and Regional Hierarchy," Working Paper Series 1047, Research Institute of Industrial Economics.
    15. Katiuscia Lavoratori & Davide Castellani, 2021. "Too close for comfort? Microgeography of agglomeration economies in the United Kingdom," Journal of Regional Science, Wiley Blackwell, vol. 61(5), pages 1002-1028, November.
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    17. Evert Meijers & Martijn Burger & Michiel Meeteren & Zachary Neal & Ben Derudder, 2016. "Disentangling agglomeration and network externalities: A conceptual typology," Papers in Regional Science, Wiley Blackwell, vol. 95(1), pages 61-80, March.
    18. Klaesson, Johan & Larsson, Johan P, 2014. "Education and Self-employment Propensity," Working Paper Series in Economics and Institutions of Innovation 345, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    19. Martin Andersson & Johan P Larsson & Joakim Lundblad, 2015. "The Productive City Needs both - localization and urbanization economies across spatial scales in the city," ERSA conference papers ersa15p385, European Regional Science Association.
    20. Martin Andersson & Johan P. Larsson, 2022. "Mysteries of the trade? Skill-specific local agglomeration economies," Regional Studies, Taylor & Francis Journals, vol. 56(9), pages 1538-1553, September.
    21. Andersson, Martin & Larsson, Johan P & Wernberg, Joakim, 2019. "The economic microgeography of diversity and specialization externalities – firm-level evidence from Swedish cities," Research Policy, Elsevier, vol. 48(6), pages 1385-1398.
    22. Łukasz Piętak, 2022. "Regional disparities, transmission channels and country's economic growth," Journal of Regional Science, Wiley Blackwell, vol. 62(1), pages 270-306, January.
    23. Johan P Larsson, 2017. "Non-routine activities and the within-city geography of jobs," Urban Studies, Urban Studies Journal Limited, vol. 54(8), pages 1808-1833, June.
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    More about this item

    Keywords

    J24; J31; R12;
    All these keywords.

    JEL classification:

    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity
    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • 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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