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A new paper by Ed Glaeser and Matthew G. Resseger, from Harvard University, documents a strong connection between per worker productivity and metropolitan area population, which is commonly interpreted as evidence for the existence of agglomeration economies.
This correlation is particularly strong in cities with higher levels of skill and virtually non-existent in less skilled metropolitan areas. This fact is particularly compatible with the view that urban density is important because proximity spreads knowledge, which either makes workers more skilled or entrepreneurs more productive. Bigger cities certainly attract more skilled workers, and there is some evidence suggesting that human capital accumulates more quickly in urban areas.
Source
The Complementarity Between Cities and Skills, by Edward L. Glaeser (Harvard University and NBER) and Matthew G. Resseger (Harvard University)
Via: Creative Class Blog