Urban-biased structural change

Natalie Chen, Dennis Novy, Carlo Perroni and Horng Chern Wong

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: Using firm-level data from France, we document that the shift of economic activity from manufacturing to services over the last few decades has been urban-biased: structural change has been more pronounced in areas with higher population density. This bias can be accounted for by the location choices of large services firms that sort into big cities and large manufacturing firms that increasingly locate in suburban and rural areas. Motivated by these findings, we estimate a structural model of city formation with heterogeneous firms and international trade. We find that agglomeration economies have strengthened for services but weakened for manufacturing. This divergence is a key driver of the urban bias, but it dampens aggregate structural change. Rising manufacturing productivity and falling international trade costs further contribute to the growth of large services firms in the densest urban areas, boosting services productivity and services exports, but also land prices.

Keywords: agglomeration; cities; firm sorting; manufacturing; productivity; services; trade costs; ESRC grant ES/S007121/1; ERC TRADENET grant (714597) (search for similar items in EconPapers)
JEL-codes: F00 F15 R12 R14 (search for similar items in EconPapers)
Pages: 44 pages
Date: 2023-11-28
New Economics Papers: this item is included in nep-bec, nep-eur, nep-geo and nep-ure
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Downloads: (external link)
http://eprints.lse.ac.uk/121286/ Open access version. (application/pdf)

Related works:
Working Paper: Urban-biased structural change (2023)
Working Paper: Urban-Biased Structural Change (2023)
Working Paper: Urban-Biased Structural Change (2023)
Working Paper: Urban-Biased Structural Change (2023)
Working Paper: Urban-Biased Structural Change (2023)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:121286

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