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Over the past few decades, the population and employment growth of small and large locations in the United States have diverged. Many smaller cities and rural areas saw declining population and employment from 2000 to 2017 as residents and jobs migrated to larger, more prosperous locations. This migration might suggest that the benefits of size, such as business productivity and urban amenities, have become greater over time. However, the migration might also reflect other factors, such as the disproportionate specialization of smaller locations in the declining manufacturing and agriculture sectors.

Jordan Rappaport documents the faster population and employment growth of medium and large metropolitan areas compared with smaller locations and finds growth is strongly positively correlated with population. Moreover, he finds that most of this correlation is driven by size itself rather than other characteristics. However, he also finds that this relationship breaks down for the largest metro areas. His results suggest that both the benefits and costs of size have increased over the past few decades.

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Publication information: 4th Quarter 2018
Updated December 19, 2018, to correct p-values in Table A-2
DOI: 10.18651/ER/4q18Rappaport


Jordan Rappaport

Senior Economist

Jordan Rappaport is a senior economist at the Federal Reserve Bank of Kansas City. He joined the Bank in 1999 following completing his Ph.D. in economics at Harvard University. J…