Complex Economic Activities Concentrate in Large Cities (1807.07887v1)

Abstract: Why do some economic activities agglomerate more than others? And, why does the agglomeration of some economic activities continue to increase despite recent developments in communication and transportation technologies? In this paper, we present evidence that complex economic activities concentrate more in large cities. We find this to be true for technologies, scientific publications, industries, and occupations. Using historical patent data, we show that the urban concentration of complex economic activities has been continuously increasing since 1850. These findings suggest that the increasing urban concentration of jobs and innovation might be a consequence of the growing complexity of the economy.

• The paper demonstrates that complex economic activities, evidenced by patent and publication data, concentrate in large cities following super-linear scaling laws.
• It employs historical and contemporary datasets alongside scaling laws to quantitatively link city size with the division of knowledge in economic processes.
• The findings imply that urban agglomeration of knowledge-intensive sectors may exacerbate spatial inequality, urging targeted policy interventions.

Concentration of Complex Economic Activities in Urban Areas

In the research paper "Complex Economic Activities Concentrate in Large Cities," Balland et al. present a rigorous analysis exploring the spatial dynamics of economic activities and their correlation with urban environments. The paper posits that complex economic activities are increasingly agglomerated in large cities and elucidates the underlying patterns through historical and contemporary data on patents, scientific publications, industrial output, and occupational distribution in the United States.

Key Findings

The paper empirically demonstrates that the concentration of economic activities in urban areas is positively correlated with their complexity. This finding spans several domains:

1. Patents: More complex technologies, as evidenced by historical patent data since 1850, show a pronounced trend towards spatial concentration in large metropolitan statistical areas (MSAs). The urban concentration of complex technologies such as those in the field of "Computer, Hardware, and Software" exceeds that of less complex technologies like "Pipes & Joints."
2. Scientific Publications: Research fields requiring larger teams and a finer division of knowledge, often seen in complex scientific endeavors, are more likely to be based in urban centers.
3. Industries and Occupations: Complex industries and occupations, often requiring higher educational attainment, exhibit a greater degree of urban concentration compared to their less complex counterparts.

The authors utilize scaling laws as a quantitative measure, showing super-linear scaling relationships between city population sizes and various outputs (such as patents, GDP, and employment), with differentiation based on complexity levels.

Theoretical Implications

This paper dovetails with the literature on urban concentration and economic complexity, supporting the notion that economic outputs scale super-linearly with city size. The authors connect this scaling behavior with the division of knowledge necessitated by complex economic activities. It highlights that as economies involve more complex and knowledge-intensive processes, these processes derive substantial benefits from the dense social networks and the faster knowledge spill-overs typical of urban settings.

The research aligns with theories by Bettencourt et al. on urban scaling and provides empirical support for the hypothesis that more complex activities require a deeper division of knowledge and labor, best facilitated by urban environments.

Practical Implications

The paper highlights critical implications for policymakers concerning spatial inequality. Complex economic activities tend to cluster in large urban areas, potentially exacerbating disparities between large cities and smaller regions. As technological progression continues, the gap between metropolitan and non-metropolitan areas may widen, necessitating targeted policy interventions to mitigate spatial inequality and ensure balanced economic growth.

Future Directions

The authors suggest that further exploration into the mechanisms underpinning the concentration of complex activities could enrich the understanding and forecasting of urban scaling laws. Given the rapid evolution of communication technologies, future research could investigate if and how digital interaction can substitute for physical proximity in transferring the tacit knowledge critical for complex economic processes.

In conclusion, this paper provides a comprehensive analysis of the agglomeration of complex economic activities and its dependence on urban environments, thereby contributing significantly to our understanding of economic geography and urban economics. While advancements in technology seem to have flattened some aspects of globalization, they have simultaneously accentuated the concentration of complex economic activities in the world's major cities. This duality presents both challenges and opportunities for future scholarship and policy-making.