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SERC/Urban and Spatial Programme Discussion Paper
What Makes Cities More Productive? Agglomeration Economies and the Role of Urban Governance: Evidence from 5 OECD Countries
Rudiger Ahrend, Emily Farchy, Ioannis Kaplanis and Alexander C. Lembcke July 2015
Paper No' SERCDP0178:
Full Paper (pdf)

JEL Classification: R12; R23; R50; H73

Tags: cities; productivity; governance; agglomeration economies

This paper estimates agglomeration benefits across five OECD countries, and represents the first empirical analysis that combines evidence on agglomeration benefits and the productivity impact of metropolitan governance structures, while taking into account the potential sorting of individuals across cities. The comparability of results in a multi-country setting is supported through the use of a new internationally-harmonised definition of cities based on economic linkages rather than administrative boundaries. In line with the literature, the analysis confirms that city productivity increases with city size but finds that cities with fragmented governance structures tend to have lower levels of productivity. This effect is mitigated by the existence of a metropolitan governance body.