Inter-city firm connections and the scaling of urban economic indicators

11 Pages Posted: 17 Nov 2023

See all articles by Vicky Chuqiao Yang

Vicky Chuqiao Yang

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Jacob Jackson

Brown University

Chris Kempes

Santa Fe Institute

Date Written: October 19, 2023

Abstract

Cities exhibit consistent returns to scale in economic outputs, and urban scaling analysis is widely adopted to uncover common mechanisms in cities’ socioeconomic productivity. Leading theories view cities as closed systems, with returns to scale arising from intra-city social interactions. Here, we argue that the interactions between cities, particularly via shared organizations such as firms, significantly influence a city’s economic output. By examining global data on city connectivity through multinational firms alongside urban scaling GDP statistics from the US, EU, and China, we establish that global connectivity notably enhances GDP, after controlling for population. After accounting for global connectivity, the effect of population on GDP is no longer distinguishable from linear. To distinguish between local and global mechanisms, we analyzed murder case data, anticipating dominant local effects. As expected, inter-city connectivity showed no significant impact. Our research highlights that inter-city effects affect some urban outputs more than others. This empirical analysis lays the groundwork for incorporating inter-city organizational connections into urban scaling theories and could inform future model development.

Keywords: Urban scaling, Complex systems, Computational Social Science

JEL Classification: N/A

Suggested Citation

Yang, Vicky Chuqiao and Jackson, Jacob and Kempes, Chris, Inter-city firm connections and the scaling of urban economic indicators (October 19, 2023). Available at SSRN: https://ssrn.com/abstract=4607355 or http://dx.doi.org/10.2139/ssrn.4607355

Vicky Chuqiao Yang (Contact Author)

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

Jacob Jackson

Brown University ( email )

Box 1860
Providence, RI 02912
United States

Chris Kempes

Santa Fe Institute ( email )

1399 Hyde Park Road
Santa Fe, NM 87501
United States

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