RWP 19-08, November 2019; updated February 2021
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 improve market access and enhance growth. Using data on U.S. counties and metro areas for the period 1840-2017, we document this trade off between urban shadows and urban access. Proximity to large urban centers was negatively associated with growth between 1840 and 1920, and positively associated with growth after 1920. Using a two-city spatial model, we show that the secular evolution of inter-city and intra-city commuting costs can account for this. Alternatively, the long-run decline in inter-city shipping costs relative to intra-city commuting costs is also consistent with these observed patterns.
JEL Classification: R11, R12, N91, N92
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