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The urban density premium across establishments

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  • R. Jason Faberman
  • Matthew Freedman

Abstract

We use longitudinal micro data to estimate the urban density premium for U.S. establishments, controlling for observed establishment characteristics and dynamic establishment behavior. We find that a doubling of urban density increases the average earnings of establishments by between 6 and 10 percent. The result holds after controlling for endogeneity issues and with the use of alternative measures of density. We find strong evidence against accumulated knowledge spillovers over time at the establishment level?that is, the density premium is realized at birth and is constant over the life of establishments. We find little evidence that the endogenous entry or exit of establishments can account for any of the estimated density premium.

Suggested Citation

  • R. Jason Faberman & Matthew Freedman, 2013. "The urban density premium across establishments," Working Paper Series WP-2013-01, Federal Reserve Bank of Chicago.
    • Handle: RePEc:fip:fedhwp:wp-2013-01
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    More about this item

    JEL classification:

    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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