Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

Abstract: I analyze the effects of sub-city level density of economic activity on worker productivity. Using a geocoded dataset on employment and wages in the city areas of Sweden, the analysis is based on squares representing “neighborhoods” (0.0625 km2), “districts” (1 km2), and “agglomerations” (10 km2). The wage-density elasticity depends crucially on spatial resolution, with the elasticity being highest in neighborhood squares. The results are consistent with i) the existence of a localized density spillover effect and ii) quite sharp attenuation of human capital spillovers. An implication of the findings is that if the data source is not sufficiently disaggregated, analyses of the density-productivity link risk understating the benefits of working in dense parts of regions, such as the central business districts.

Keywords: Density; productivity; spatial dependence; geo-coded data; neighborhood effects; human capital; agglomeration economies

JEL-codes: J24; J31; R12

21 pages, June 12, 2013

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