Authors
Fabian Eckert
University of California, San Diego
Sharat Ganapati
Georgetown University
Conor Walsh
Visiting Scholar, Institute
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.
This paper previously circulated with the title "Skilled Scalable Services: The New Urban Bias in Economic Growth."
This paper previously circulated with the title "Skilled Tradable Services: The Transformation of U.S. High-Skill Labor Markets."
