arXiv 14 Apr 2026 · Econometrics
arXiv:2604.13188 · PDF · DOI · OpenAlex · Extracted main text
Firms in denser areas are more productive, a pattern attributed to agglomeration economies and firm selection. To disentangle these two channels, the popular approach of Combes et al. (2012, ECTA) critically assumes that total factor productivity (TFP) distributions between denser and less dense areas are the same up to mean, variance, and left-tail truncation. We empirically validate this assumption using Spanish administrative firm-level data and recent econometric methods adapted to noisy TFP estimates. Our results find that TFP distributions are indeed statistically identical up to these parameters, validating the use of such productivity decompositions. Furthermore, using only the mean and variance is sufficient to capture differences for all sectors. Accordingly, the productivity advantage of cities may be entirely due to agglomeration rather than stronger selection, suggesting that policymakers should focus on policies targeting agglomeration. Finally, our approach extends to related contexts like differences in worker skill distributions.
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The works this paper leans on most, across its whole bibliography — not restricted to papers in our corpus. Ranked by composite intensity, which combines how often a work is mentioned, how many sections mention it, and how much of that falls in the main text rather than the appendix.
| Reference | Intensity | Mentions | Sections | Main text | |
|---|---|---|---|---|---|
| 1 | P. P. Combes, G. Duranton, L. Gobillon, D. Puga, and S. Roux (2012) The Productivity Advantages of Large Cities: Distinguishing Agglomeration From Firm Selection | 1.000 | 9 | 5 | 100% |
| 2 | V. Morozov (2026) Inference on Extreme Quantiles of Unobserved Individual Heterogeneity | 0.928 | 4 | 3 | 100% |
| 3 | K. Jochmans and M. Weidner (2024) Inference on a Distribution from Noisy Draws | 0.909 | 8 | 5 | 75% |
| 4 | J. de la Roca and D. Puga (2017) Learning By Working in Big Cities | 0.843 | 3 | 3 | 100% |
| 5 | D. A. Ackerberg, K. Caves, and G. Frazer (2015) Identification Properties of Recent Production Function Estimators | 0.511 | 2 | 2 | 50% |
| 6 | M. Almunia, D. López-Rodríguez, and E. Moral-Benito (1802) Evaluating the Macro-Representativeness of a Firm-Level Database: An Application for the Spanish Economy | 0.511 | 2 | 2 | 50% |
| 7 | G. Dhaene and K. Jochmans (2015) Split-Panel Jackknife Estimation of Fixed-Effect Models | 0.511 | 2 | 2 | 50% |
| 8 | Banco De España (2026) Microdata on Individual Enterprises, 2026 | 0.405 | 1 | 1 | 100% |
| 9 | L. Barras, P. Gagliardini, and O. Scaillet (2022) Skill, Scale, and Value Creation in the Mutual Fund Industry | 0.405 | 1 | 1 | 100% |
| 10 | P. P. Combes and L. Gobillon (2015) The Empirics of Agglomeration Economies | 0.405 | 1 | 1 | 100% |
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