Conferences at Department of Economics, University of Toronto, RCEF 2012: Cities, Open Economies, and Public Policy

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The Role of Small Firms in Urban Economic Development in a Polycentric City

Steven G. Craig*, Janet E Kohlhase, Adam W Perdue

Last modified: 2012-05-11


The research in this paper empirically explores the importance of small firms in fostering economic growth, by using both cross sectional and time series variation in the relative location of
large and small firms in urban centers of employment. The paper estimates two polycentric density functions, one for employment in large firms, the other for employment in small. Our method is to compare how the relative location of large and small firms varies between the older and established
centers of employment to the newly emerging employment subcenters by using the newer areas as proxies for the older areas prior to their development. We reinforce this approach by separately examining data from 1990, and from 2010. We find that large firms are more likely than small to be found only in the CBD, but that conversely small firms are equally as likely as large firms to be found in the neighboring areas of the other subcenters. The results are mixed for the distribution of
firm size within the subcenters themselves. Our other methodology, however, is informative in this regard. A polycentric density function, capturing the simultaneous influence of each of the employment subcenters on employment throughout the county, shows that small and large firms have equal effects on employment.

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