WHAT MAKES CITIES MORE PRODUCTIVE? EVIDENCE FROM FIVE OECD COUNTRIES ON THE ROLE OF URBAN GOVERNANCE†
The authors are indebted to Luis Diaz‐Serrano, Andreas Georgiadis, Claudia Tello, and Dimitris Mavridis for collaboration on the country specific studies and useful discussions at various stages of the research. This research has benefited from comments from Lewis Dijkstra, Soo‐Jin Kim, Joaquim Oliveira Martins, Abel Schumann, William Tompson, and other members of the Regional Development Policy Division of the OECD, as well as from session participants at an ERSA workshop (University of Barcelona, 2013), an OECD Regional Development Seminar (Paris, 2014) and the SERC Annual Conference (LSE, 2014). We would also like to thank Richard Welpton from the U.K. Data Service for help with the used U.K. datasets and the staff of the Research Data Centre (FDZ) of the German Federal Employment Agency at the Institute for Employment Research for their help in accessing and remotely processing the German data. This document has been produced with the financial assistance of the European Union. The views expressed are solely of the authors and can in no way be taken to reflect the official opinion of the European Union or the OECD. Note: This work contains U.K. statistical data from ONS, which is Crown copyright and reproduced with the permission of the controller of HMSO and Queen's Printer for Scotland. The use of the ONS statistical data in this work does not imply the endorsement of the ONS in relation to the interpretation or analysis of the statistical data. This work uses research datasets, which may not exactly reproduce National Statistics aggregates. This study also uses the German weakly anonymous BA‐Employment Panel (version 1998–2007). Data access was provided via remote data access.
ABSTRACT
In estimating agglomeration benefits across five OECD countries, this paper represents the first empirical analysis that contrasts cross‐country evidence on agglomeration benefits with the productivity impact of metropolitan governance structures, while taking into account the potential sorting of individuals across cities. The comparability of results in a multicountry setting is supported through the use of a new internationally harmonised definition of cities based on economic linkages rather than administrative boundaries. The analysis finds that cities with fragmented governance structures tend to have lower levels of productivity. The estimated elasticity for an increase in the number of local jurisdiction is 0.06, which is halved by the existence of a metropolitan governance body. The productivity effect is sizeable and at least as important as the agglomeration benefit found due to city size.
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