Ideas for growth session 2: Infrastructure and Urbanisation

Enrico Moretti (UC Berkeley and IGC) chaired Session 2 and introduced Nathaniel Baum-Snow (Brown University) who presented his research on transport infrastructure and cities spatial development in China. The researchers’ main question is to understand the extent to which elements of infrastructure that has been built over the last 20 years in Chinese cities have shaped the spatial form of cities, redistributed population and decentralized production. Elaborating on the infrastructural elements, the main findings of the paper are: highway rays have had no effect on industrial decentralization; railroad rays, on the other hand, have displaced about 26% of industrial GDP from the centres to the suburbs but have had no effect on population displacement; finally, ring roads have affected both decentralization of industrial GDP and that of population. These results would be important for city planners and government when they check the costs and benefits of different infrastructural projects.

The second presenter, Diego Puga (Instituto Madrilene Estudios Avanzados), presented research on explaining the discrepancy in wages between bigger and smaller cities: more specifically, why are employers willing to offer/accept higher wages in big cities. Some potential explanations span: firms’ static advantages of being in a big city, sorting advantages in bigger cities of workers with higher initial ability, and learning advantages, whereby bigger cities allow workers to accumulate more valuable experience. The authors used administrative data with longitudinal information of measures of social security, income tax and census records, and other factors that help explain the variability in wages. Some of the most interesting results are that most of the wage differences between big and small cities come from worker ability and experience learnt in a bigger city. Furthermore, the extra earning in bigger cities is enhanced by in workers with greater ability.