Working Paper: CEPR ID: DP15676
Authors: Benjamin Schoefer; Oren Ziv
Abstract: Why do cities differ so much in productivity? A long literature has sought out system- atic sources, such as inherent productivity advantages, market access, agglomeration forces, or sorting. We document that up to three quarters of the measured regional productivity dispersion is spurious, reflecting the “luck of the draw” of finite counts of idiosyncratically heterogeneous plants that happen to operate in a given location. The patterns are even more pronounced for new plants, hold for alternative productivity measures, and broadly extend to European countries. This large role for individual plants suggests a smaller role for places in driving regional differences.
Keywords: Productivity; Urban Economics; Regional Economics
JEL Codes: R12; D24; L11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| granularity bias (D80) | regional productivity differences (R11) |
| idiosyncratically heterogeneous plants (B50) | regional productivity differences (R11) |
| spurious productivity differences (O49) | regional productivity dispersion (R12) |
| geographic locations (R12) | regional productivity differences (R11) |
| location effects (R32) | variance of productivity differences (D29) |
| industry-specific location effects (R32) | variance of productivity differences (D29) |