Growth in Cities

Abstract

Assesses the theories of knowledge spillover and growth proposed by Romer, Porter, and Jacobs by focusing on the largest industries in 170 U.S. cities. While the theories of Romer and Porter both emphasize spillovers within an industry, Romer predicts that a local monopoly is better for growth as compared to Porter's prediction that local competition fosters growth. Jacobs takes an opposing approach, holding that knowledge transfers come from outside the core industry. Data used in the analysis were collected from the 1956 and 1987 editions of the County Business Patterns, which is produced by the U.S. Bureau of Census. For each of 170 cities considered in the analysis, only the top six industries in that city were analyzed. To determine the effect of externalities on growth, the examination looks at the same industries in different cities. In cities where an industry is overrepresented, those industries grow more slowly. This result supports Jacobs' theory. Further results show that faster growth occurred in cities where the firms were smaller than the average national size of such firms. The work of Jacobs and Porter gains support from this result. Additional support for Jacobs is shown by the finding that growth is faster in city-industries where the remainder of the city is less specialized. The results are consistent for manufacturing and nonmanufacturing industries, and whether the industry has a primarily local or global market. Overall, the greatest support is shown for the theory put forth by Jacobs, that major technological spillovers often occur between rather than within industries. (SRD)

Keywords: County Business Patterns, U.S. Bureau of Census, Specialization, Market competition, Knowledge spillovers, Urban development, Cities, Firm growth, Firm size, Knowledge transfer, Market diversification, Localization