The Complementarity between Cities and Skills
There is a strong connection between per worker productivity and metropolitan area population, which is commonly interpreted as evidence for the existence of agglomeration economies. This correlation is particularly strong in cities with higher levels of skill and virtually non-existent in less skilled metropolitan areas. This fact is particularly compatible with the view that urban density is important because proximity spreads knowledge, which either makes workers more skilled or entrepreneurs more productive. Bigger cities certainly attract more skilled workers, and there is some evidence suggesting that human capital accumulates more quickly in urban areas.
Both authors thank the Taubman Center for State and Local Government for research support. Kristina Tobio provided excellent research assistance; Erin Dea provided excellent editorial aid. Yuko Aoyama and Gilles Duranton provided helpful comments. The views expressed herein are those of the author(s) and do not necessarily reflect the views of the National Bureau of Economic Research.