Macroeconomic Implications of Agglomeration
Cities exist because of the productivity gains arising from clustering production and workers, a process called agglomeration. How important is agglomeration for aggregate growth? This paper constructs a dynamic stochastic general equilibrium model of cities and uses it to estimate the effect of local agglomeration on aggregate growth. We combine aggregate time series and city-level panel data to estimate our modelâ€™s parameters by the Generalized Method of Moments. The estimates imply that local agglomeration has an economically and statistically significant impact on the growth rate of per capita consumption, raising it by about 10 percent.
|Date of creation:||2013|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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