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Urban-Biased Growth: A Macroeconomic Analysis

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  • Fabian Eckert
  • Sharat Ganapati
  • Conor Walsh

Abstract

Since 1980, US wage growth has been fastest in large cities. Empirically, we show that most of this urban-biased growth reflects wage growth at large Business Services firms, which are also the most intensive users of information and communications technology (ICT) capital in the US economy. We provide an explicit economic mechanism whereby ICT is more complementary with labor at larger firms. Quantitatively, we find that with such a complementarity, the observed decline in ICT prices alone can account for most of the urban-biased growth, since Business Services firms in big cities tend to be large.

Suggested Citation

  • Fabian Eckert & Sharat Ganapati & Conor Walsh, 2020. "Urban-Biased Growth: A Macroeconomic Analysis," CESifo Working Paper Series 8705, CESifo.
  • Handle: RePEc:ces:ceswps:_8705
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    Cited by:

    1. Althoff, Lukas & Eckert, Fabian & Ganapati, Sharat & Walsh, Conor, 2022. "The Geography of Remote Work," Regional Science and Urban Economics, Elsevier, vol. 93(C).
    2. Enghin Atalay & Sebastian Sotelo & Daniel Tannenbaum, 2021. "The Geography of Job Tasks," Working Papers 682, Research Seminar in International Economics, University of Michigan.
    3. Marcolino, Marcos, 2022. "Accounting for structural transformation in the U.S," Journal of Macroeconomics, Elsevier, vol. 71(C).
    4. Gervais, Antoine & Markusen, James R. & Venables, Anthony, 2021. "Urban specialisation; from sectoral to functional," CEPR Discussion Papers 15677, C.E.P.R. Discussion Papers.
    5. Lukas Althoff & Fabian Eckert & Sharat Ganapati & Conor Walsh, 2020. "The City Paradox: Skilled Services and Remote Work," CESifo Working Paper Series 8734, CESifo.
    6. Oliver Hümbelin & Lukas Hobi & Robert Fluder, 2021. "Rich Cities, Poor Countryside? Social Structure of the Poor and Poverty Risks in Urban and Rural Places in an Affluent Country. An Administrative Data based Analysis using Random Forest," University of Bern Social Sciences Working Papers 40, University of Bern, Department of Social Sciences, revised 10 Nov 2021.
    7. Acosta, Camilo & Lyngemark, Ditte Håkonsson, 2021. "The internal spatial organization of firms: Evidence from Denmark," Journal of Urban Economics, Elsevier, vol. 124(C).

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    More about this item

    Keywords

    urban growth; high-skill services; technological change;
    All these keywords.

    JEL classification:

    • J31 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs - - - Wage Level and Structure; Wage Differentials
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • 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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