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Productivity and the density of economic activity

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Abstract

Two different models - one based on local geographical externalities and the other on the variety of only locally available intermediate services - are shown to give rise to a simple, estimable relation between employment density and productivity. Using data on gross state output for the U.S., we find that agglomeration more than offsets congestion effects in denser areas. While our estimate of the elasticity of productivity with respect to density is small, it explains more than 50% of the observed state productivity differences, given the large differences in density.

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File URL: https://econ-papers.upf.edu/papers/120.pdf
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Paper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 120.

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Date of creation: May 1995
Handle: RePEc:upf:upfgen:120
Contact details of provider: Web page: http://www.econ.upf.edu/

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Find related papers by JEL classification:
  • O40 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - General
  • O47 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Empirical Studies of Economic Growth; Aggregate Productivity; Cross-Country Output Convergence

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  1. Michael Spence, 1976. "Product Selection, Fixed Costs, and Monopolistic Competition," Review of Economic Studies, Oxford University Press, vol. 43(2), pages 217-235.
  2. Henderson, J V, 1974. "The Sizes and Types of Cities," American Economic Review, American Economic Association, vol. 64(4), pages 640-656, September.
  3. Steven J. Davis, 1992. "Cross-Country Patterns of Change in Relative Wages," NBER Chapters,in: NBER Macroeconomics Annual 1992, Volume 7, pages 239-300 National Bureau of Economic Research, Inc.
  4. Fujita,Masahisa, 1991. "Urban Economic Theory," Cambridge Books, Cambridge University Press, number 9780521396455, September.
  5. Dixit, Avinash K & Stiglitz, Joseph E, 1977. "Monopolistic Competition and Optimum Product Diversity," American Economic Review, American Economic Association, vol. 67(3), pages 297-308, June.
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  7. Glaeser, Edward L & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1992. "Growth in Cities," Journal of Political Economy, University of Chicago Press, vol. 100(6), pages 1126-1152, December.
    • Edward L. Glaeser & Hedi D. Kallal & Jose A. Scheinkman & Andrei Shleifer, 1991. "Growth in Cities," NBER Working Papers 3787, National Bureau of Economic Research, Inc.
    • Glaeser, Edward Ludwig & Kallal, Hedi D. & Scheinkman, Jose A. & Shleifer, Andrei, 1992. "Growth in Cities," Scholarly Articles 3451309, Harvard University Department of Economics.
  8. Carlino, Gerald A. & Voith, Richard, 1992. "Accounting for differences in aggregate state productivity," Regional Science and Urban Economics, Elsevier, vol. 22(4), pages 597-617, November.
  9. Leo Sveikauskas, 1975. "The Productivity of Cities," The Quarterly Journal of Economics, Oxford University Press, vol. 89(3), pages 393-413.
  10. repec:hoo:wpaper:e-94-11 is not listed on IDEAS
  11. Glaeser, Edward L & Mare, David C, 2001. "Cities and Skills," Journal of Labor Economics, University of Chicago Press, vol. 19(2), pages 316-342, April.
  12. Abdel-Rahman, H. M., 1988. "Product differentiation, monopolistic competition and city size," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 69-86, February.
  13. Henderson, J. Vernon, 1986. "Efficiency of resource usage and city size," Journal of Urban Economics, Elsevier, vol. 19(1), pages 47-70, January.
  14. Rivera-Batiz, Francisco L., 1988. "Increasing returns, monopolistic competition, and agglomeration economies in consumption and production," Regional Science and Urban Economics, Elsevier, vol. 18(1), pages 125-153, February.
  15. Henderson, Vernon, 1997. "Externalities and Industrial Development," Journal of Urban Economics, Elsevier, vol. 42(3), pages 449-470, November.
  16. Garcia-Mila, Teresa & McGuire, Therese J & Porter, Robert H, 1996. "The Effect of Public Capital in State-Level Production Functions Reconsidered," The Review of Economics and Statistics, MIT Press, vol. 78(1), pages 177-180, February.
  17. Moomaw, Ronald L., 1985. "Firm location and city size: Reduced productivity advantages as a factor in the decline of manufacturing in urban areas," Journal of Urban Economics, Elsevier, vol. 17(1), pages 73-89, January.
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