Unlocking Export Potential: Larger Cities Drive Economic Growth and Trade Intensity
Export activity is concentrated in larger cities more than overall economic activity. This is explained by a model that combines international trade and economic geography, showing that firms with different productivity levels choose to locate in bigger cities and engage in exporting. Removing housing supply restrictions boosts both economy-wide productivity and export intensity by attracting more firms to larger cities. Trade liberalization tends to shift employment towards larger cities within sectors. The effects of these policies differ from traditional trade and economic geography models.