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What Makes Cities More Productive? Agglomeration Economies and the Role of Urban Governance: Evidence from 5 OECD Countries

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  • Rudiger Ahrend
  • Emily Farchy
  • Ioannis Kaplanis
  • Alexander C. Lembcke

Abstract

This paper estimates agglomeration benefits across five OECD countries, and represents the first empirical analysis that combines evidence on agglomeration benefits and the productivity impact of metropolitan governance structures, while taking into account the potential sorting of individuals across cities. The comparability of results in a multi-country setting is supported through the use of a new internationally-harmonised definition of cities based on economic linkages rather than administrative boundaries. In line with the literature, the analysis confirms that city productivity increases with city size but finds that cities with fragmented governance structures tend to have lower levels of productivity. This effect is mitigated by the existence of a metropolitan governance body.

Suggested Citation

  • Rudiger Ahrend & Emily Farchy & Ioannis Kaplanis & Alexander C. Lembcke, 2015. "What Makes Cities More Productive? Agglomeration Economies and the Role of Urban Governance: Evidence from 5 OECD Countries," SERC Discussion Papers 0178, Spatial Economics Research Centre, LSE.
  • Handle: RePEc:cep:sercdp:0178
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    Keywords

    Cities; productivity; governance; agglomeration economies;

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R23 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Regional Migration; Regional Labor Markets; Population
    • R50 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - General
    • H73 - Public Economics - - State and Local Government; Intergovernmental Relations - - - Interjurisdictional Differentials and Their Effects

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