Urban-Biased Growth: A Macroeconomic Analysis

Abstract:

After 1980, larger US cities experienced substantially faster wage growth than smaller ones. We show that this urban bias mainly reflected wage growth at large Business Services firms. These firms stand out through their high per-worker expenditure on information technology and disproportionate presence in big cities. We introduce a spatial model of investment-specific technical change that can rationalize these patterns. Using the model as an accounting framework, we find that the observed decline in the investment price of information technology capital explains most urban-biased growth by raising the profits of large Business Services firms in big cities.

Speaker: Fabian Eckert, Assistant Professor of Economics at University of California San Diego

Location: online or at Kiel Institute for the World Economy, Chausseestraße 111, 10115 Berlin

Organizers: Kiel Institute for the World Economy, CEPR

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