CREAT: Census Research Exploration and Analysis Tool

Geography in Reduced Form

January 2017

Written by: Oren Ziv

Working Paper Number:

CES-17-10

Abstract

Geography models have introduced and estimated a set of competing explanations for the persistent relationships between firm and location characteristics, but cannot identify these forces. I introduce a solution method for models in arbitrary geographies that generates reduced-form predictions and tests to identify forces acting through geographic linkages. This theoretical approach creates a new strategy for spatial empirics. Using the correct observables, the model shows that geographic forces can be taken into account without being directly estimated; establishment and employment density emerge as sufficient statistics for all geographic forces. I present two applications. First, the model can be used to evaluate whether geographic linkages matter and when simplified models suffice: the mono-centric model is a good fit for business services firms but cannot capture the geography of manufactures. Second, the model generates reduced-form tests that distinguish between spillovers and firm sorting and finds evidence of sorting.

Document Tags and Keywords

Keywords Keywords are automatically generated using KeyBERT, a powerful and innovative keyword extraction tool that utilizes BERT embeddings to ensure high-quality and contextually relevant keywords.

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:
market, economist, company, model, monopolistic, country, reallocation productivity, area, impact, economically, unobserved, spillover, region, geographically, city, geography, geographic

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:
Metropolitan Statistical Area, Center for Economic Studies, Ordinary Least Squares, Total Factor Productivity, Harvard University, Business Services, Longitudinal Business Database, Boston College, North American Industry Classification System

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