Uncovering the Urban Advantage of Australian Firms: New Evidence from BLADE Data

Vol: 
47/2022
Author name: 
Bellofatto AA
Domínguez B
Dwyer E
Journal title: 
CAMA Working Paper
Year: 
2022
Month: 
August
Abstract: 

This paper quantifies the productivity advantages of urban firms within and across Australian states and industries. Following Combes et al. (2012), we decompose the source of urban advantages into agglomeration and selection effects using the most exhaustive data source on Australian businesses: BLADE. Our findings show that most of the urban productivity advantages are due to agglomeration effects and that these advantages differ substantially across Australian states. They range from 10% in WA to 1.5% in SA in terms of relative urban productivity gains for a representative firm with mean productivity. These advantages also vary across industries: they are twice as large for manufacturing firms in QLD (5.1%) vs NSW (2.4%) while nearly three times as large for service firms in NSW (11.7%) vs QLD (4.1%). Urban advantages are concentrated among mature firms, and among high-productivity businesses within young firms.

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