Consumption Cities versus Production Cities : New Considerations and Evidence

Cities dramatically vary in their sectoral composition across the world, possibly lendingcredence to the theory that some cities are production cities with high employment shares of urban tradables whileothers are consumption cities with high employment shares of urban non-tradables. A model of structural change highlightsthree paths leading to the rise of consumption cities: resource rents from exporting fuels and mining products,agricultural exports, and premature deindustrialization. These findings appear to be corroborated using both country-and city-level data. Compared to cities in industrialized countries, cities of similar sizes in resource-rich anddeindustrializing countries have lower shares of employment in manufacturing, tradable services, and the formal sector,and higher shares of employment in non-tradables and the informal sector. Results on the construction of “vanitous”tall buildings provide additional evidence on the relationship between resource exports and consumptioncities. Finally, the evidence suggests that having mostly consumption cities might have economic implications for a country.