The Comparative Advantage of Cities

+ Donald Davis, Jonathan Dingel


What determines the distributions of skills, occupations, and industries across cities? We develop a theory to jointly address these fundamental questions about the spatial organization of economies. Our model incorporates a system of cities, their internal urban structures, and a high-dimensional theory of factor-driven comparative advantage. It predicts that larger cities will be skill-abundant and specialize in skill-intensive activities according to the monotone likelihood ratio property. We test the model using data on 270 US metropolitan areas, 3 to 9 educational categories, 22 occupations, and 21 manufacturing industries. The results provide support for our theory’s predictions.


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Donald Davis is the Kathryn and Shelby Cullom Davis Professor of Economics and International Affairs at Columbia University and a Research Associate at the National Bureau of Economics Research.

Jonathan Dingel is an Assistant Professor of Economics at the University of Chicago Booth School of Business where he teaches international and urban economics. 

Tile image courtesy of Baron Visuals via Flickr.

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