The Comparative Advantage of Cities

The Comparative Advantage of Cities

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.

Donald R. Davis, Jonathan I. Dingel


October 2014

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By |2018-01-01T00:00:00-08:00January 1st, 2018|Efficiency/Growth, Land Use Regulation, Reference|