Do Amenities and Diversity Encourage City Growth? A Link Through Skilled Labor

Abstract

The share of skilled workers in urban populations has steadily increased since 1970 in US metropolitan areas, but more in some cities than in others. A higher concentration of skills is a sought after asset for cities as it affects population growth positively, also when the initial share is instrumented for by using land-grant colleges. However, skilled cities may attract more skilled workers, but not because they are more skilled initially: increasing returns are rejected when controlling for fixed effects and bias due to inclusion of a lagged dependent variable. Several amenities such as a low-skilled personal service sector do affect the concentration of skills positively. Although firms seem to benefit from externalities, there is no convincing case for an effect on the concentration of college graduates in a city.