Working Paper: CEPR ID: DP8572
Authors: Kristian Behrens; Giordano Mion; Yasusada Murata; Jens Südekum
Abstract: The world is replete with spatial frictions. Shipping goods across cities entails trade frictions. Commuting within cities causes urban frictions. How important are these frictions in shaping the spatial economy? We develop and quantify a novel framework to address this question at three different levels: Do spatial frictions matter for the city-size distribution? Do they affect individual city sizes? Do they contribute to the productivity advantage of large cities and the nature of competition in cities? The short answers are: no, yes, and it depends.
Keywords: city-size distribution; markups; productivity; trade frictions; urban frictions
JEL Codes: F12; R12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Spatial frictions (R12) | US city-size distribution (R12) |
| Eliminating urban frictions (R11) | changes in individual city sizes (R12) |
| Eliminating trade frictions (F19) | changes in individual city sizes (R12) |
| Eliminating trade frictions (F19) | aggregate productivity gains (O49) |
| Eliminating trade frictions (F19) | reduction in markups (D40) |
| Eliminating urban frictions (R11) | productivity gains (O49) |
| Eliminating urban frictions (R11) | reduction in markups (D40) |