In Short:

We find scant evidence that the average firm benefits from being surrounded by a greater amount of economic activity at this spatial scale.

Abstract

Using Canadian administrative data, this paper presents evidence of revenue and productivity spillovers across firms at fine spatial scales. Accounting for the endogenous sorting of firms across space, we estimate an average elasticity of firm revenue and productivity with respect to the average quality of other firms within 75 meters of 0.024. We find scant evidence that the average firm benefits from being surrounded by a greater amount of economic activity at this spatial scale. Sorting of higher-quality firms into more productive locations and higher average and aggregate quality peer groups is salient in the data.

About the author

Nathaniel Baum-Snow

Professor, School of Government and Policy

Nathaniel Baum-Snow is an urban economist with a wide range of urban policy research interests, including in housing and real estate, transportation, the operation of urban labor markets, and local economic development.