American Economic Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Firm Sorting and Agglomeration
American Economic Review
vol. 108,
no. 11, November 2018
(pp. 3117–53)
Abstract
To account for the uneven distribution of economic activity in space, I propose a theory of the location choices of heterogeneous firms in a variety of sectors across cities. In equilibrium, the distribution of city sizes and the sorting patterns of firms are uniquely determined and affect aggregate TFP and welfare. I estimate the model using French firm-level data and find that nearly half of the productivity advantage of large cities is due to firm sorting, the rest coming from agglomeration economies. I quantify the general equilibrium effects of place-based policies: policies that subsidize smaller cities have negative aggregate effects.Citation
Gaubert, Cecile. 2018. "Firm Sorting and Agglomeration." American Economic Review 108 (11): 3117–53. DOI: 10.1257/aer.20150361Additional Materials
JEL Classification
- D22 Firm Behavior: Empirical Analysis
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- R11 Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
- R32 Other Spatial Production and Pricing Analysis