Quantile Approach for Distinguishing Agglomeration from Firm Selection in Stata

Author Name KONDO Keisuke (Fellow, RIETI)
Creation Date/NO. March 2017 17-T-001
Research Project RIETI Data Management Project
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Firms and workers, on average, are more productive in larger cities. One possible explanation which has been studied for a long time is that firms and workers in larger cities benefit from agglomeration economies. Another possible explanation is that the higher concentration of economic activities in larger cities forces tougher competition, and less productive firms cannot survive there. To distinguish agglomeration from firm selection, Combes et al. (2012, "The productivity advantages of large cities: Distinguishing agglomeration from firm selection," Econometrica, vol. 80) newly propose a quantile approach. This paper introduces the estquant command that implements their quantile approach in Stata. Our Monte Carlo experiments emphasize the importance of simultaneously considering agglomeration and selection.