Econometrica Vol. 82 No. 2 2014
Macroeconomic Implications of Agglomeration
Abstract
Cities exist because of the productivity gains that arise from clustering production and workers, a process called agglomeration. How important is agglomeration for aggregate growth? This paper constructs a dynamic stochastic general equilibrium model of cities and uses it to estimate the effect of local agglomeration on aggregate growth. We combine aggregate time-series and city-level panel data to estimate the model's parameters via generalized method of moments. The estimates imply a statistically and economically significant impact of local agglomeration on the growth rate of per capita consumption, raising it by about 10%.
- DOI
- 10.3982/ecta9029
- Volume
- 82
- Issue
- 2
- Pages
- 731-764
- Language
- en
- Sources
- openalex crossref bibtex:phds-export.bib