Local Industrial Policy and Sectoral Hubs

Esteban Rossi-Hansberg, Pierre Daniel Sarte and Felipe Schwartzman

AEA Papers and Proceedings, 2021, vol. 111, 526-31

Abstract: We 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.

JEL-codes: L52 R12 R32 (search for similar items in EconPapers)
Date: 2021
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Citations: View citations in EconPapers (1)

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DOI: 10.1257/pandp.20211076

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