Essays in Economic Geography

Abstract

While economic geography is concerned chiefly with proximity, models in urban economics eliminate proximity as a relative metric in order to preserve tractability. I introduce a new method of solving spatial models that allows for the consideration of proximity in an economic geography setting while retaining much of the tractability of the urban framework. The first chapter in this thesis introduces the solution method for continuous space geography models and shows how it reduces the complexity of the equilibrium conditions and allows such a model to generate more predictions than was previously possible. In this chapter, I build a model of firm location decisions in a spatial setting in order to provide a new explanation for the relationship between productivity and density: sorting of heterogeneous firms for market access. This geographic model of sorting breaks observa- tional equivalence between firm sorting and agglomeration forces: under specific conditions, positive shocks to density can negatively affect average productivity through changes in the local composition of firms, inconsistent with models of agglomeration forces without sorting. Using restricted access establishment-level Census data, I document strong intra-city relationships between location and firm characteristics predicted by the model. I test for evidence of composition effects, instrumenting for the supply of new non-residential real estate construction using the geographic distribution of multi-city real estate developers, and find evidence of firm sorting. The second chapter in this thesis finds persistent differences in self-reported subjective well-being across U.S. metropolitan areas and uses historical data to show that cities that are now declining were also unhappy in their more prosperous past. The third chapter in this thesis considers the spatial location decisions of multi-unit firms and highlights two previously understudied potential agglomeration and dispersion forces: intra-firm distance costs and market cannibalization.