Firm sorting boosts productivity in large cities, reshaping urban landscapes.
Firms are not evenly spread out in cities - some places have more productive firms than others. The way firms are distributed affects overall productivity and well-being. By looking at data from French companies, it was found that almost half of the productivity boost in big cities comes from how firms are spread out. Policies that reduce traffic in cities can make everyone more productive, while giving money to struggling areas can have the opposite effect.