Productive Cities: Sorting, Selection, and Agglomeration

TLDR

Large cities generate higher per‑capita output than smaller ones, likely due to talent sorting, selective entrepreneurship, and agglomeration economies. The study develops a model of city systems that integrates sorting, selection, and agglomeration to explore their complementarities. The model combines talent sorting, entrepreneurial selection, and agglomeration economies within a systems‑of‑cities framework. The model reproduces stylized facts about sorting, selection, and agglomeration, generates Zipf’s law for city sizes under realistic parameters, and offers a framework to reinterpret existing empirical evidence.

Abstract

Large cities produce more output per capita than small cities. This higher productivity may occur because more talented individuals sort into large cities, because large cities select more productive entrepreneurs and firms, or because of agglomeration economies. We develop a model of systems of cities that combines all three elements and suggests interesting complementarities between them. The model can replicate stylized facts about sorting, agglomeration, and selection in cities. It also generates Zipf’s law for cities under empirically plausible parameter values. Finally, it provides a useful framework within which to reinterpret extant empirical evidence.