Working Paper: CEPR ID: DP8067
Authors: Anthony J. Venables
Abstract: Productivity is high in cities partly because the urban environment acts as a self-selection mechanism. If workers have imperfect information about the quality of workers with whom they match and matches take place within cities, then high-ability workers will choose to live and work in expensive cities. This self-selection improves the quality of matches in such cities. The mechanism may be reinforced by the development of informational networks in cities with a large proportion of high ability workers. As a consequence productivity in these cities is high for workers of all ability types.
Keywords: city; economic geography; productivity; self-selection; sorting; urban
JEL Codes: R0; R1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| High living costs in cities (R29) | Higher concentration of high-ability workers in expensive cities (D29) |
| Higher concentration of high-ability workers in expensive cities (D29) | Greater overall productivity in those cities (O49) |
| High living costs in cities (R29) | Greater overall productivity (O49) |