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Firm Dynamics In An Urban Economy

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  • Jeffrey Brinkman
  • Daniele Coen‐Pirani
  • Holger Sieg

Abstract

We develop a new dynamic general equilibrium model to explain firm entry, exit, and relocation decisions in an urban economy with multiple locations and agglomeration externalities. We characterize the stationary distribution of firms that arises in equilibrium. We estimate the parameters of the model using a method of moments estimator. Using unique panel data collected by Dun and Bradstreet, we find that agglomeration externalities increase the productivity of firms by up to 8%. Economic policies that subsidize firm relocations to the central business district increase agglomeration externalities in that area. They also increase economic welfare in the economy.

Suggested Citation

  • Jeffrey Brinkman & Daniele Coen‐Pirani & Holger Sieg, 2015. "Firm Dynamics In An Urban Economy," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 56, pages 1135-1164, November.
    • Handle: RePEc:wly:iecrev:v:56:y:2015:i::p:1135-1164
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    File URL: http://hdl.handle.net/10.1111/iere.12133
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    Cited by:

    1. Behrens, Kristian & Mion, Giordano & Murata, Yasusada & Suedekum, Jens, 2017. "Spatial frictions," Journal of Urban Economics, Elsevier, vol. 97(C), pages 40-70.
    2. J. Scott Holladay & Lawrence D. LaPlue III, 2020. "Decomposing Changes in Establishment Level Emissions with Entry and Exit," Working Papers 2020-01, University of Tennessee, Department of Economics.
    3. Sergey Kichko, 2018. "Competition, Land Price, and City Size," HSE Working papers WP BRP 190/EC/2018, National Research University Higher School of Economics.
    4. Sergey Kichko & Wen-Jung Liang & Chao-Cheng Mai & Jacques-Francois Thisse & Ping Wang, 2020. "The Rise (and Fall) of Tech Clusters," CESifo Working Paper Series 8527, CESifo.
    5. Brinkman, Jeffrey C., 2016. "Congestion, agglomeration, and the structure of cities," Journal of Urban Economics, Elsevier, vol. 94(C), pages 13-31.
    6. Cecile Gaubert, 2018. "Firm Sorting and Agglomeration," NBER Working Papers 24478, National Bureau of Economic Research, Inc.
    7. Gaubert, Cécile, 2018. "Firm Sorting and Agglomeration," CEPR Discussion Papers 12835, C.E.P.R. Discussion Papers.
    8. Jordan Rappaport, 2014. "Monocentric city redux," Research Working Paper RWP 14-9, Federal Reserve Bank of Kansas City, revised 01 Nov 2014.

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