Modeling growth of urban firm networks (2009.05528v1)

Abstract: The emergence of interconnected urban networks is a crucial feature of globalisation processes. Understanding the drivers behind the growth of such networks - in particular urban firm networks -, is essential for the economic resilience of urban systems. We introduce in this paper a generative network model for firm networks at the urban area level including several complementary processes: the economic size of urban areas at origin and destination, industrial sector proximity between firms, the strength of links from the past, as well as the geographical and socio-cultural distance. An empirical network analysis on European firm ownership data confirms the relevance of each of these factors. We then simulate network growth for synthetic systems of cities, unveiling stylized facts such as a transition from a local to a global regime or a maximal integration achieved at an intermediate interaction range. We calibrate the model on the European network, outperforming statistical models and showing a strong role of path-dependency. Potential applications of the model include the study of mitigation policies to deal with exogenous shocks such as economic crisis or potential lockdowns of countries, which we illustrate with an application on stylized scenarios.