Economic Diversity and the Resilience of Cities

RePEc Short ID: pde1223
ORCID iD: 0000-0003-4785-4487

Fuchs, Simon; Kondo, Illenin O.; Maghin, Helene; de Soyres, Francois

doi:10.21034/iwp.106

Working Paper

Economic Diversity and the Resilience of Cities

Abstract: We show how local worker flow adjustment margins yield a theory-consistent sufficient statistic approximating the welfare effects of local shocks. Furthermore, we isolate a city’s insurance value as this approximation’s second-order term. Leveraging rich labor flows data across occupations, industries, and cities in France, we estimate spatial and non-spatial flows responses to local labor demand shocks. Less economically diverse French cities experience deeper contractions in gross outflows following negative shocks. In contrast, more economic concentration begets a modestly larger increase in gross worker flows following positive shocks. Altogether, we uncover a sizable welfare insurance gains from local economic diversity.

Keywords: Sufficient statistics; Welfare; Concentration; Economic diversity; Labor flows;

JEL Classification: J61; J62; J21;

https://doi.org/10.21034/iwp.106