Abstract
This study uses panel data to estimate stochastic production frontiers for Canadian cities. Efficiency indices are derived from the production frontiers. Regression analysis of the determinants of a city’s inefficiency shows that population size and density both increase efficiency. These results are consistent with the existence of static agglomeration economies or of a systematically increasing failure of smaller cities to use best-practice technology. In either case, the results imply that urbanization may have an important positive influence on national economic growth.
Highlights
the United States. . .. (The) resurgence of interest in economic growth has increased the importance of understanding the differences in productivity among the manufacturing sectors of cities and regions
These differences are well documented for many countries, including Brazil, Japan, Sweden, and the United States; econometric studies find that agglomeration economies-localization or urbanization economies-are important determinants of these differences (Aberg 1973; Henderson 1988; Moomaw 1983a, 1988; and Nakamura 1985)
We use two stochastic frontiers-one from the Cobb-Douglas production function and one from the CES production function-to estimate the efficiency of manufacturing in Canadian cities
Summary
The resurgence of interest in economic growth has increased the importance of understanding the differences in productivity among the manufacturing sectors of cities and regions These differences are well documented for many countries, including Brazil, Japan, Sweden, and the United States; econometric studies find that agglomeration economies-localization or urbanization economies-are important determinants of these differences (Aberg 1973; Henderson 1988; Moomaw 1983a, 1988; and Nakamura 1985). This paper uses stochastic frontier techniques to derive efficiency (relative productivity) measures for 50 Canadian cities. The study's main purpose is to provide information about the determinants of productivity differences among Canadian cities It examines the importance of agglomeration economies and puts its findings for Canada in context with findings for other countries. It speculates about the importance of our results for the general economic growth conversation
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