Most studies of the effects of density measure it rather crudely, as I noted recently, and simply average out the number of people per unit of land area. By this standard measure, Los Angeles is denser than New York. But density is far, far more concentrated in the center of Manhattan than anywhere in L.A.
That raises a big question: Do cities with more concentrated density — where people and economic activity are concentrated and spiky near the center — see even better economic performance?
Recent data from the U.S. Census enable us to take a look, providing a measure of density that is based on the actual distribution of people within and across cities and metro areas. This measure of 'population-weighted density' is based on the average density of the small local areas — the Census tracts — that comprise metros. The Census Bureau also measures the density of cities and metros at the one-mile and five-mile radii of the city center.
With the help of my Martin Prosperity Institute colleague Charlotta Mellander, I looked at how these different types of density are associated with a wide range of regional economic outcomes. Mellander ran simple correlations between these density measures and variables like regional income, wages, economic output, college grads, the creative class, high tech industry, home prices, commuting patterns, and even happiness. The table below summarizes the key results. As usual, I note that correlation does not equal causation. Still, the findings are interesting and help shed light on the role of density — and especially cities where population is more densely concentrated in and around their cores — on regional economic development.
The first thing one notices is that metros which rank highly on the average measure of density — those that average a lot of people per square mile — are not necessarily those where people and economic activity are most concentrated near the center, as the scatter-graph below shows. While average density and population-weighted density are correlated (.46), they are clearly not the same thing.
Not surprisingly, large metros are the ones that tend to have density more concentrated near their cores. The correlation between population-weighted density and population is .64.
Ever since Jane Jacobs, urban thinkers and economists have argued that clusters of talented and ambitious people increase one another’s productivity and the productivity of the broader community, spurring economic growth. So, what about economic growth: Is it higher in metros where density is more concentrated? The short answer is yes.
Economic growth and development, according to several key measures, is higher in metros that are not just dense, but where density is more concentrated. This is true for productivity, measured as economic output per person, as well as both income and wages.
Talent levels are also higher where density is more concentrated. This holds for both the share of college grads and the share of knowledge, professional, and creative workers. Conversely, working class jobs are more likely to be found in metros that are less densely concentrated.