Working Paper: CEPR ID: DP7922
Authors: Kristian Behrens; Gilles Duranton; Frédéric Robert-Nicoud
Abstract: Large cities produce more output per capita than small cities. This may occur because more talented individuals sort into large cities, because large cities select more productive entrepreneurs and firms, or because of agglomeration economies. We develop a model of systems of cities that combines all three elements and suggests interesting complementarities between them. The model can replicate stylised facts about sorting, agglomeration, and selection in cities. It can also generate Zipf's law for cities. Finally, it provides a useful framework within which to reinterpret existing empirical evidence.
Keywords: Agglomeration; City Size; Selection; Sorting; Urban Premium; Zipf's Law
JEL Codes: J24; R10; R23
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Larger cities (R12) | Higher output per capita (E23) |
| Agglomeration economies (R11) | Higher output per capita (E23) |
| Sorting of talented individuals (C78) | Higher output per capita (E23) |
| Tougher selection (C52) | Higher output per capita (E23) |
| Tougher selection in larger cities (R23) | Sorting of more talented individuals (D29) |
| Sorting of more talented individuals (D29) | More productive firms (D21) |
| City size (R12) | Productivity (O49) |
| City size (R12) | More productive firms (D21) |
| Talent control (M54) | Elasticity drops to 0.51 (F69) |