Urban Efficiency and Sectoral Structure - Empirical Results for German Cities

Stephan Hitzschke

Publications of Darmstadt Technical University, Institute for Business Studies (BWL) from Darmstadt Technical University, Department of Business Administration, Economics and Law, Institute for Business Studies (BWL)

Abstract: This dissertation investigates different time-variable criteria of German cities within the period between 1998 and 2007. The empirical analysis is based on a data set with 112 larger cities which are classified as independent cities. Efficiency and its improvement are the major economic characteristics in the analysis. The main questions for this dissertation are: What is the effect of city size on industrial efficiency? Is there an optimal city size of the free German cities with respect to urban efficiency? What are the consequences of the urban hierarch for the free German cities? What is the effect of industrial efficiency on urban price levels? Is there a difference between East and West Germany with respect to urban price levels, which is not explained by economic and social factors? What are the effects of technical progress on the development of value added and employment in German cities? Does technical progress lead to an increase of economic output or to a decrease of employment? Chapter two presents in detail the estimation methodologies, which are applied in the course of the dissertation. Robust regressions are introduced, which account for outliers without excluding the information of these observations. In addition, an introduction to spatial data analysis is given with a sequential testing procedure in order to derive an estimation model which can explain most of the variation of the considered endogenous variable based on a low number of additional spatial parameters. Furthermore, multilevel analyses are explained which have stringent requirements on the observed data structure. Chapters three and four explain the size of cities and find an optimal city size determined by the efficient use of the production factors, capital and labor, to gain value added in the different sectors located in each city. The main difference between these two chapters is the measurement of efficiency, which results in different optimal city sizes. Chapter five takes the city size, efficiency, and urban hierarchy to explain price level differences between the cities. The chapter estimates price level differences observed between large cities in Germany. The estimation model accounts for the presence of spatial dependencies and geographical heterogeneity in the number of neighboring cities within a radius of 100 km. Chapter six takes a dynamic look on the development of the industries within the cities. It analyzes the role of productivity change and city-specific characteristics on economic growth for the free cities. Productivity change is measured by the Malmquist index and its components, which are estimated by non-parametric data envelopment analysis. The nested structure as well as the interaction between industries within cities and over time is accounted for by estimating multilevel models. As in the previous analyses, the regressions in chapter six account for urban hierarchy, city size and east-west differences. Chapter seven concludes, summarizes the main findings and connects the chapters. Furthermore, prospects for future research are given.

Date: 2014
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