The Identification of Agglomeration Economies

Pierre-Philippe Combes (1) , Gilles Duranton (2) , Laurent Gobillon (3, 4, 5)

1 GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille
2 Department of Economics
3 PSE - Paris-Jourdan Sciences Economiques
4 PSE - Paris School of Economics
5 INED - Institut national d'études démographiques

Measures of urban productivity are typically positively associated with city population. But is this relationship causal? We discuss the main sources of bias in the proper identification of agglomeration effects. We also assess a variety of solutions that have been proposed in the literature to deal with them.

Keywords: Agglomeration economies; Instrumental variables; Structural estimation; Natural experiments

Domains: Humanities and Social Sciences; Economics and Finance

Pierre-Philippe Combes, Gilles Duranton, Laurent Gobillon. The Identification of Agglomeration Economies. Journal of Economic Geography, 2011, 11 (2), pp.253-266. ⟨10.1093/jeg/lbq038⟩. ⟨halshs-00754555⟩