Productivity in Cities: Does City Size Matter?

November/December 1987

Business Review — While we sometimes hear gloomy reports of the decline of American cities, economists have found that big cities can enhance the productivity of the firms located there.

In some cases, firms benefit from being near similar firms, in order to dip into the city's pool of specialized workers or specialized products. In other cases, firms benefit from the great variety of workers and services a big city offers. Firm will exploit these advantages through the "invisible hand" of the market place. But local policymakers have a role in "lending a hand" to minimize costs of growth, such as congestion, high rents, and high wages.

This article appeared in the November/December 1987 edition of Business Review.

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