1887

OECD Regional Development Working Papers

Working papers from the Regional Development Policy Division of the OECD cover a full range of topics including regional statistics and analysis, urban governance and economics, rural governance and economics, and multi-level governance. Depending on the programme of work, the papers can cover specific topics such as regional innovation and networks, the determinants of regional growth or fiscal consolidation at the sub-national level.

English

Does It Pay to Live in Big(ger) Cities?

The Role of Agglomeration Benefits, Local Amenities, and Costs of Living

This study approaches the question whether it “pays” to live in big(ger) cities in a three-fold manner: first, it estimates how city size affects worker productivity (agglomeration benefits) in Germany, based on individual-level wage data. Second, it considers whether productivity benefits translate into real gains for workers by taking local price levels into account. Third, it examines the role of amenities in explaining differences in real benefits across cities. The estimated elasticity for agglomeration benefits is around 0.02, implying that comparable workers in Hamburg (3 million residents) are about 6% more productive than in Recklinghausen (150 000). But agglomeration benefits are, on average, offset by higher prices, i.e. city size does not systematically translate into real pecuniary benefits for workers. Amenities, e.g. seaside access, theatres, universities, or “disamenities”, e.g. air pollution, explain – to a large degree – variation in real pecuniary benefits, i.e. real wages are higher in low-amenity cities.

English

Keywords: agglomeration costs, agglomeration benefits, Functional Urban Areas, local amenities, cost of living, cities
JEL: R12: Urban, Rural, Regional, Real Estate, and Transportation Economics / General Regional Economics / Size and Spatial Distributions of Regional Economic Activity; J31: Labor and Demographic Economics / Wages, Compensation, and Labor Costs / Wage Level and Structure; Wage Differentials; R23: Urban, Rural, Regional, Real Estate, and Transportation Economics / Household Analysis / Urban, Rural, Regional, Real Estate, and Transportation Economics: Regional Migration; Regional Labor Markets; Population; Neighborhood Characteristics
This is a required field
Please enter a valid email address
Approval was a Success
Invalid data
An Error Occurred
Approval was partially successful, following selected items could not be processed due to error