Urban-Biased Growth: A Macroeconomic Analysis
June 2024
Working Paper Number:
CES-24-33
Abstract
After 1980, larger US cities experienced substantially faster wage growth than smaller ones. We show that this urban bias mainly reflected wage growth at large Business Services firms. These firms stand out through their high per-worker expenditure on information technology and disproportionate presence in big cities. We introduce a spatial model of investment-specific technical change that can rationalize these patterns. Using the model as an accounting framework, we find that the observed decline in the investment price of information technology capital explains most urban-biased growth by raising the profits of large Business Services firms in big cities.
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:
investment,
market,
productivity growth,
growth,
technological,
employ,
growth productivity,
sector,
larger firms,
employment growth,
innovation,
expenditure,
capital productivity,
metropolitan,
profit,
workforce,
industry wages,
wage growth,
urban,
city,
relocation,
growth employment,
rent,
economic growth
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Metropolitan Statistical Area,
Standard Industrial Classification,
Center for Economic Studies,
Ordinary Least Squares,
Cobb-Douglas,
Bureau of Economic Analysis,
Census Bureau Longitudinal Business Database,
Current Population Survey,
Business Services,
Longitudinal Business Database,
Bureau of Labor,
Princeton University,
Decennial Census,
North American Industry Classification System,
American Community Survey,
Census Bureau Business Register,
Quarterly Census of Employment and Wages,
Census Bureau Disclosure Review Board,
Disclosure Review Board,
Federal Statistical Research Data Center
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