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Industry Churning and the Evolution of Cities: Evidence for Germany

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  • Findeisen, Sebastian

    (University of Konstanz)

  • Suedekum, Jens

    (Heinrich Heine University Düsseldorf)

Abstract

In this paper we show that the recent model by Duranton (AER, 2007) performs remarkably well in replicating the city size distribution of West Germany, much better than the simple rank-size rule known as Zipf’s law. The main mechanism of this theoretical framework is the “churning” of industries across cities. Little is known so far about the determinants of local industry turnover, however. We present an empirical analysis of the excess churning index for West German cities, which describes the strength of intra-city industry reallocations that has occurred over time. We find that human capital is a key driver of growth and local industrial change, but only among successful cities. Industrial change within unsuccessful cities is strongly driven by the disappearance of old-fashioned and declining industries such as agriculture or mining. On a more general level, our results suggest that the recent model by Duranton is a powerful description of the urban growth process. Still there are some aspects that are not captured by that model, which are at the core of other theories of urban growth.

Suggested Citation

  • Findeisen, Sebastian & Suedekum, Jens, 2007. "Industry Churning and the Evolution of Cities: Evidence for Germany," IZA Discussion Papers 3180, Institute of Labor Economics (IZA).
    • Handle: RePEc:iza:izadps:dp3180
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    References listed on IDEAS

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    More about this item

    Keywords

    structural change; city size distribution; churning; industry turnover; urban growth; Zipf’s law;
    All these keywords.

    JEL classification:

    • O18 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R12 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade (economic geography)

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