PDFDownload paper RWP 19-08, November 2019; updated July 2020
Does a location's growth benefit or suffer from being geographically close to large economic centers? Spatial proximity may lead to competition and hurt growth, but it may also generate positive spillovers and enhance growth. Using data on U.S. counties and metro areas for the period 1840–2017, we document this tradeoff between urban shadows and urban spillovers. Proximity to large urban centers was negatively associated with growth from 1840 to 1920, and positively associated with growth after 1920. Using a two-city spatial equilibrium model with intra-city and inter-city commuting, we show that the secular evolution of commuting costs can account for this and other observed patterns in the data.
JEL Classification: R12, N93
Cuberes, David, Klaus Desmet, and Jordan Rappaport. 2019. “Urban Growth Shadows.” Federal Reserve Bank of Kansas City, Research Working Paper no. 19-08, November. Available at External Linkhttps://doi.org/10.18651/RWP2019-08