The Comparative Advantage of Cities

58 Pages Posted: 22 Oct 2014

See all articles by Donald R. Davis

Donald R. Davis

National Bureau of Economic Research (NBER); Columbia University

Jonathan I. Dingel

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Date Written: October 2014

Abstract

What determines the distributions of skills, occupations, and industries across cities? We develop a theory to jointly address these fundamental questions about the spatial organization of economies. Our model incorporates a system of cities, their internal urban structures, and a high-dimensional theory of factor-driven comparative advantage. It predicts that larger cities will be skill-abundant and specialize in skill-intensive activities according to the monotone likelihood ratio property. We test the model using data on 270 US metropolitan areas, 3 to 9 educational categories, 22 occupations, and 21 manufacturing industries. The results provide support for our theory's predictions.

Suggested Citation

Davis, Donald R. and Dingel, Jonathan I., The Comparative Advantage of Cities (October 2014). NBER Working Paper No. w20602, Available at SSRN: https://ssrn.com/abstract=2513162

Donald R. Davis (Contact Author)

National Bureau of Economic Research (NBER) ( email )

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Columbia University ( email )

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Jonathan I. Dingel

University of Chicago - Booth School of Business ( email )

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HOME PAGE: http://www.jdingel.com

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

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