Local Industrial Policy and Sectoral Hubs
AbstractWe study the desirability of industrial policies that generate sectoral hubs using a quantitative spatial model with cognitive nonroutine and other occupations. The productivity of each occupation in an industry depends on sector-specific production externalities, which we estimate using a model-implied instrumental variable approach. We find that the optimal policy gives rise to national hubs in coastal cities in tradable services, like professional services, and smaller regional hubs in less tradable services, like health and education. The optimal policy prescribes developing manufacturing in smaller towns. We decompose the implied changes in local costs and the available varieties in each sector.
CitationRossi-Hansberg, Esteban, Pierre-Daniel Sarte, and Felipe Schwartzman. 2021. "Local Industrial Policy and Sectoral Hubs." AEA Papers and Proceedings, 111: 526-31. DOI: 10.1257/pandp.20211076
- R32 Other Spatial Production and Pricing Analysis
- L52 Industrial Policy; Sectoral Planning Methods
- R12 Size and Spatial Distributions of Regional Economic Activity