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The urban density premium across establishments

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  • R. Jason Faberman
  • Matthew Freedman

Abstract

We use longitudinal micro data to estimate the urban density premium for U.S. establishments, controlling for observed establishment characteristics and dynamic establishment behavior. We find that a doubling of urban density increases the average earnings of establishments by between 6 and 10 percent. The result holds after controlling for endogeneity issues and with the use of alternative measures of density. We find strong evidence against accumulated knowledge spillovers over time at the establishment level—that is, the density premium is realized at birth and is constant over the life of establishments. We find little evidence that the endogenous entry or exit of establishments can account for any of the estimated density premium.

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  • R. Jason Faberman & Matthew Freedman, 2013. "The urban density premium across establishments," Working Paper Series WP-2013-01, Federal Reserve Bank of Chicago.
  • Handle: RePEc:fip:fedhwp:wp-2013-01
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    Cited by:

    1. Combes, Pierre-Philippe & Gobillon, Laurent, 2015. "The Empirics of Agglomeration Economies," Handbook of Regional and Urban Economics, Elsevier.
    2. Gabriel Ahlfeldt & Elisabetta Pietrostefani, 2017. "The Economic Effects of Density: A Synthesis," CESifo Working Paper Series 6744, CESifo Group Munich.
    3. Gabriel M. Ahfeldt & Elisabetta Pietrostefani, 2017. "The Compact City in Empirical Research: A Quantitative Literature Review," SERC Discussion Papers 0215, Spatial Economics Research Centre, LSE.
    4. Elisa Giannone, 2017. "Skill-Biased Technical Change and Regional Convergence," 2017 Meeting Papers 190, Society for Economic Dynamics.
    5. 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.
    6. Chen, Anping & Dai, Tianshi & Partridge, Mark, 2017. "Agglomeration and Firm Wage Inequality: Evidence from China," MPRA Paper 83516, University Library of Munich, Germany.
    7. Paul Verstraten & Gerard Verweij & Peter Zwaneveld, 2018. "Why do wages grow faster in urban areas? Sorting of high potentials matters," CPB Discussion Paper 377, CPB Netherlands Bureau for Economic Policy Analysis.
    8. Pierre-Philippe Combes & Laurent Gobillon, 2014. "The Empirics of Agglomeration Economies," PSE Working Papers halshs-01071761, HAL.
    9. Gabriel M. Ahlfeldt & Elisabetta Pietrostefani, 2017. "The Economic Effects of Density: A Synthesis," SERC Discussion Papers 0210, Spatial Economics Research Centre, LSE.
    10. Ahlfeldt, Gabriel M. & Pietrostefani, Elisabetta, 2017. "The economic effects of density: A synthesis," LSE Research Online Documents on Economics 83628, London School of Economics and Political Science, LSE Library.

    More about this item

    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)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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