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THE URBAN DENSITY PREMIUM ACROSS ESTABLISHMENTS

October 2014

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  Location, Location, Location
  

  October 2021

  Authors: David Card, Moises Yi, Jesse Rothstein

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  CES-21-32R

  We use data from the Longitudinal Employer-Household Dynamics program to study the causal effects of location on earnings. Starting from a model with employer and employee fixed effects, we estimate the average earnings premiums associated with jobs in different commuting zones (CZs) and different CZ-industry pairs. About half of the variation in mean wages across CZs is attributable to differences in worker ability (as measured by their fixed effects); the other half is attributable to place effects. We show that the place effects from a richly specified cross sectional wage model overstate the causal effects of place (due to unobserved worker ability), while those from a model that simply adds person fixed effects understate the causal effects (due to unobserved heterogeneity in the premiums paid by different firms in the same CZ). Local industry agglomerations are associated with higher wages, but overall differences in industry composition and in CZ-specific returns to industries explain only a small fraction of average place effects. Estimating separate place effects for college and non-college workers, we find that the college wage gap is bigger in larger and higher-wage places, but that two-thirds of this variation is attributable to differences in the relative skills of the two groups in different places. Most of the remaining variation reflects the enhanced sorting of more educated workers to higher-paying industries in larger and higher-wage CZs. Finally, we find that local housing costs at least fully offset local pay premiums, implying that workers who move to larger CZs have no higher net-of-housing consumption.
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• Working Paper

  
  
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  The high pace of output and input reallocation across producers is pervasive in the U.S. economy. Evidence shows this high pace of reallocation is closely linked to productivity. Resources are shifted away from low productivity producers towards high productivity producers. While these patterns hold on average, the extent to which the reallocation dynamics in recessions are 'cleansing' is an open question. That is, are recessions periods of increased reallocation that move resources away from lower productivity activities towards higher productivity uses? It could be recessions are times when the opportunity cost of time and resources are low implying recessions will be times of accelerated productivity enhancing reallocation. Prior research suggests the recession in the early 1980s is consistent with an accelerated pace of productivity enhancing reallocation. Alternative hypotheses highlight the potential distortions to reallocation dynamics in recessions. Such distortions might arise from many factors including, for example, distortions to credit markets. We find that in post-1980 recessions prior to the Great Recession, downturns are periods of accelerated reallocation that is even more productivity enhancing than in normal times. In the Great Recession, we find the intensity of reallocation fell rather than rose (due to the especially sharp decline in job creation) and the reallocation that did occur was less productivity enhancing than in prior recessions.
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• Working Paper

  
  
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  Authors: John Haltiwanger, Lucia Foster, Chad Syverson

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  There is considerable evidence that producer-level churning contributes substantially to aggregate (industry) productivity growth, as more productive businesses displace less productive ones. However, this research has been limited by the fact that producer-level prices are typically unobserved; thus within-industry price differences are embodied in productivity measures. If prices reflect idiosyncratic demand or market power shifts, high 'productivity' businesses may not be particularly efficient, and the literature's findings might be better interpreted as evidence of entering businesses displacing less profitable, but not necessarily less productive, exiting businesses. In this paper, we investigate the nature of selection and productivity growth using data from industries where we observe producer-level quantities and prices separately. We show there are important differences between revenue and physical productivity. A key dissimilarity is that physical productivity is inversely correlated with plant-level prices while revenue productivity is positively correlated with prices. This implies that previous work linking (revenue-based) productivity to survival has confounded the separate and opposing effects of technical efficiency and demand on survival, understating the true impacts of both. We further show that young producers charge lower prices than incumbents, and as such the literature understates the productivity advantage of new producers and the contribution of entry to aggregate productivity growth.
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  Wage Premia in Employment Clusters: Agglomeration or Worker Heterogeneity?
  

  February 2010

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• Working Paper

  
  
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  September 2011

  Authors: J. David Brown, John S. Earle

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  CES-11-26

  This paper investigates the origins of productivity leaders, those that operate close to and help push out the production frontier. Do such businesses emerge as top performers from the very beginning of their lives, for example as the consequence of an outstanding founding idea, technology, or location? Or, at the other extreme, do they appear initially as completely average (or even underperformers) that exhibit gradual improvement as they learn and develop with age? To answer this question we draw upon five decades of U.S. Census of Manufacturing (CM) establishment-level data, tracing the productivity leaders of the most recent CM (2007) back over their observed life spans. We also examine possible industry-level correlates of variation in the extent of nature versus nurture that are suggested by theories of industry dynamics and economic growth.
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• Working Paper

  
  
  Has Falling Crime Invited Gentrification?
  

  January 2017

  Authors: Ingrid Gould Ellen, Keren Mertens Horn, Davin Reed

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  CES-17-27

  Over the past two decades, crime has fallen dramatically in cities in the United States. We explore whether, in the face of falling central city crime rates, households with more resources and options were more likely to move into central cities overall and more particularly into low income and/or majority minority central city neighborhoods. We use confidential, geocoded versions of the 1990 and 2000 Decennial Census and the 2010, 2011, and 2012 American Community Survey to track moves to different neighborhoods in 244 Core Based Statistical Areas (CBSAs) and their largest central cities. Our dataset includes over four million household moves across the three time periods. We focus on three household types typically considered gentrifiers: high-income, college-educated, and white households. We find that declines in city crime are associated with increases in the probability that highincome and college-educated households choose to move into central city neighborhoods, including low-income and majority minority central city neighborhoods. Moreover, we find little evidence that households with lower incomes and without college degrees are more likely to move to cities when violent crime falls. These results hold during the 1990s as well as the 2000s and for the 100 largest metropolitan areas, where crime declines were greatest. There is weaker evidence that white households are disproportionately drawn to cities as crime falls in the 100 largest metropolitan areas from 2000 to 2010.
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• Working Paper

  
  
  RACE-SPECIFIC AGGLOMERATION ECONOMIES: SOCIAL DISTANCE AND THE BLACK-WHITE WAGE GAP
  

  April 2013

  Authors: Stephen Ross, Shihe Fu, Elizabeth Ananat

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  CES-13-24

  We demonstrate a striking but previously unnoticed relationship between city size and the black-white wage gap, with the gap increasing by 2.5% for every million-person increase in urban population. We then look within cities and document that wages of blacks rise less with agglomeration in the workplace location, measured as employment density per square kilometer, than do white wages. This pattern holds even though our method allows for non-parametric controls for the effects of age, education, and other demographics on wages, for unobserved worker skill as proxied by residential location, and for the return to agglomeration to vary across those demographics, industry, occupation and metropolitan areas. We find that an individual's wage return to employment density rises with the share of workers in their work location who are of their own race. We observe similar patterns for human capital externalities as measured by share workers with a college education. We also find parallel results for firm productivity by employment density and share college-educated using firm racial composition in a sample of manufacturing firms. These findings are consistent with the possibility that blacks, and black- majority firms, receive lower returns to agglomeration because such returns operate within race, and blacks have fewer same-race peers and fewer highly-educated same-race peers at work from whom to enjoy spillovers than do whites. Data on self-reported social networks in the General Social Survey provide further evidence consistent with this mechanism, showing that blacks feel less close to whites than do whites, even when they work exclusively with whites. We conclude that social distance between blacks and whites preventing shared benefits from agglomeration isa significant contributor to overall black-white wage disparities.
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• Working Paper

  
  
  Who Creates Jobs? Small vs. Large vs. Young
  

  August 2010

  Authors: John Haltiwanger, Ron Jarmin, Javier Miranda

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• Working Paper

  
  
  Labor Market Networks and Recovery from Mass Layoffs Before, During, and After the Great Recession
  

  June 2015

  Authors: Judith Hellerstein, David Neumark, Mark J. Kutzbach

  Working Paper Number:

  CES-15-14

  We test the effects of labor market networks defined by residential neighborhoods on re-employment following mass layoffs. We develop two measures of labor market network strength. One captures the flows of information to job seekers about the availability of job vacancies at employers of workers in the network, and the other captures referrals provided to employers by other network members. These network measures are linked to more rapid re-employment following mass layoffs, and to re-employment at neighbors' employers. We also find evidence that network connections ' especially those that provide information about job vacancies ' became less productive during the Great Recession.
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